The Mega Millions® jackpot has survived its latest test and is nearing $1 billion, while the giant Powerball® jackpot will be on the line in that game’s drawing tonight.
This is just the fourth time that the jackpots have simultaneously topped $600 million.
The Mega Millions jackpot is currently the bigger of the two, now standing at an estimated $977 million annuity, $461 million lump-sum option for the game’s next drawing on Friday. That’s the sixth-largest jackpot in Mega Millions history.
Not to be left out, the Powerball jackpot for that game’s next drawing Wednesday night is an estimated $687 million annuity, $327.3 million lump-sum option.
Truth vs. Myth: The cash amount of the jackpot is the annuitized value minus taxes.
That’s a myth.
We’re hearing some mistaken beliefs out there about the cash vs. annuity amounts for a jackpot. The cash amount is not the annuity amount minus taxes. Nor is the cash amount a specific percentage of the annuity total.
Here are the actual details involved:
If a jackpot winner in either game chooses the annuity option, they would receive 30 payments over 29 years that add up to the annuity total.
In that instance, the cash on hand in the jackpot pool from the sale of tickets in the game is invested in securities. That initial amount invested plus all the interest generated through the years adds up to the annuity amount of the jackpot. Withholdings would be applied to each payment that the winner receives.
If a winner were to pass away before receiving all their payments, the money would go into their estate. The lottery would make future payments as determined by the estate or a court.
If a jackpot winner chooses the cash option, they receive a one-time payment for the amount in the jackpot pool from the sale of tickets in the game. There is no interest income in that scenario because the money isn’t invested. The winner receives the lump-sum amount in one payment, with withholdings applied to the entire amount.
Withholding Rates In Iowa
Here in Iowa, 24 percent federal withholding applies to a jackpot prize along with 5 percent state withholding. Those amounts are automatically applied before the prize is paid and can’t be modified or waived.
The withholdings are designed to cover the jackpot winner’s tax liability from claiming a large lottery prize. But the total taxes that a winner would owe are dependent upon that person’s financial circumstances outside of winning the lottery.
In some instances, the withholdings may not be enough, in other instances, they may be too much. The details would be sorted out in the winner’s income-tax filing for the year. That is one of the reasons the Iowa Lottery always encourages its winners to consult a lawyer or financial planner who can help answer their questions.
Have Fun, But Set A Limit
The Iowa Lottery reminds everyone to enjoy the moment, but set a limit and stay within it for how much you’ll spend when buying tickets. Playing the lottery is something that should be done just for fun.
You’ll find these and other Play Smart, Be Informed details on the lottery’s website to help everyone have an accurate understanding of how lottery games work.
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