If you’re going to dream…dream big…, and the lottery is the perfect way to do just that. This week’s Mega Millions and Powerball jackpots will both be eclipsing the half-a-billion-dollar mark…with Mega Millions estimated at $615 million and rising for tonight, and Powerball estimated at $550 million on Wednesday. I, for one, will be stopping at HyVee on West Locust or West Kimberly on my way home to buy a ticket. If you just happen to get lucky and score the big prize, you can count on the tax man wanting his cut. Here’s how much you can expect to set aside to keep him happy.
Let’s say you win the $550 million and you take the cash option of $411.4 million, like most winners do. First, there’s going to be a 24% federal withholding from the total. That’s going to work out to $98.7 million, right off the top. The top tax rate is 37%, so you’d be wise to keep another 13% set aside, because the IRS is going to want that check, too. That’s another $53.5 million. So, after the Feds take their cut, your take-home of the jackpot will be $259.2…which still doesn’t suck.
Then, there’s the state. Depending on where you live, that could end up being nothing – if you live in a place like Florida…all the way up to over 13% if you’re someone living in California. Illinois taxes are higher than Iowa taxes. Of course, there’s also your local taxes, which will take a smaller chunk…but a chunk, nonetheless. So, if you’re fortunate enough to be the big winner, be a smart winner...and if I did my math right...you'll walk away with AT LEAST $15. :) Good luck tonight!!