Omni Lottery Tax Calculator (2024)

FAQs

How much tax do you pay on $1 million lottery winnings? ›

In practice, there is a 24 percent federal withholding of the gross prize, plus the remaining tax, based on your filing status. For example, if your gross prize is $1,000,000, you need to pay $334,072 in total taxes ($240,000 federal withholding, plus the remaining $94,072 for single filing status in 2021).

If the lump sum payment is chosen, the prize amount will drop to $341.77 million after a mandatory federal tax withholding of 24% is applied. Depending on their taxable income, the winner could face a federal marginal rate as high as 37%, which would further slash the winnings to $283.31 million.

The winner will now get to pick between receiving the $1.13 billion payout spread across 30 annual payments in 29 years or a lump sum cash prize of $537.5 million—usually the popular pick among winners. The cash prize will drop to $408.5 million after a mandatory federal tax withholding of 24% is deducted.

For instance, a $1.1 billion jackpot winner can choose between receiving a lump sum of approximately $525.8 million or the entire $1.1 billion paid out as an annuity over the course of 30 years. While it is enticing to see all that money in a lump sum, ABC's “Shark Tank,” Mark Cuban, encourages opting for the annuity.

For example, if you're single and earn $1 million in taxable income, you'll fall into the highest tax bracket, which is currently 37%. This means that you'll pay 37% in federal income taxes on the portion of your income that exceeds the threshold for the highest tax bracket.

Whether the winner goes with the annuity or the cash option, lottery winnings can typically be inherited or transferred to the winner's beneficiaries and heirs.

How About Your Retirement Benefits? Just like SSDI, social security retirement benefits are earned benefits. This means winning the lottery will have no impact on your retirement benefits. But it may impact your taxes on your benefits since lottery winnings have to be reported to the IRS.

As soon as you accept your payout, a large chunk of it is withheld for taxes. Though some states do not have a state lottery tax withholding, they all must withhold 24% in federal tax on prizes as large as this jackpot. With additional taxes, you'll see roughly 37% of your prize money withheld, should you win.

Castro claimed his prize in February, choosing to immediately receive nearly $1 billion in cash, which came out to be roughly $628 million after taxes. The alternative option was to collect the full $2 billion prize through an annuity over 29 years, which financial advisors say is usually the better strategy.

Lottery Annuity After Death. If a lottery winner who has opted for an annuity payout passes away, the remaining payments typically go to their estate and subsequently to any heirs or beneficiaries. This process is governed by the annuity contract's specific terms and any legal will the deceased person has left.

Is it better to take lottery, lump sum or annuity? ›

If you want your winnings right away, you'll want to select the cash option, but if you want more money in the end, you may prefer the annuity option.

It is true that lottery annuities are generally guaranteed, backed by the state or insurance companies that issue them. They offer a steady income over a period, typically 20-30 years, reducing the risk of spending all winnings at once. However, consider inflation and your financial goals before choosing an annuity.

By default, all Powerball, Mega Millions and SuperLotto Plus jackpots are paid in 30 graduated installments. A winner is given the opportunity to choose the cash value of their jackpot prize within 60 days following their approved claim.

For a $1.4 billion jackpot, you'd take home $386.82 million after federal taxes. Most winners still choose the lump sum option because the winnings can be invested right away.

A lump-sum payment provides a smaller immediate payout, while an annuity spreads payments over several years for a larger overall amount. Selling a lottery annuity can provide a lump sum for immediate financial needs but may result in the sacrifice of future guaranteed income and potential tax advantages.

However, the jackpot pushes the winner into the top federal tax bracket, which is 37% for 2024, Campo said. After the 24% withholding, the winner could still owe another 13% in federal taxes, or about $70 million.