Longing for the $1.1B Mega Millions jackpot? What taxes would cost a Pennsylvania winner
Winning a jackpot through the lottery can provide life-changing money, but how much will you actually receive when that sum hits your bank account?
The Mega Millions jackpot as of March 26 is worth an estimated $1.1 billion, while Powerball checks in with a jackpot worth around $865 million. The last eight years alone have produced the 10 largest lottery jackpots in U.S. history, ranging from $1.05 billion through Mega Millions in January 2021 to $2.04 billion through Powerball in November 2022.
Plenty of Pennsylvanians are expected to give this week’s national lottery games a shot with generous jackpots on the line. Here’s what you need to know about potential winnings and taxes in the Keystone State.
Are lottery winnings taxed in Pennsylvania?
Yes, lottery winnings are taxable under state and federal law.
In Pennsylvania, all lottery winnings are subject to the commonwealth’s 3.07% state personal income tax, plus an additional 24% through federal taxes. Pennsylvanians who win prizes of more than $600 through the state lottery automatically receive a W-2G tax form in the mail that will show if any taxes are withheld from their winnings and provide assistance when filing taxes.
The Pennsylvania Lottery automatically withholds taxes for winnings that exceed $5,000.
Multi-state lottery games, like Mega Millions and Powerball, give winners 60 days from the date a claim is filed to choose between annuity or cash payout options.
An annuity plan offers an initial payment followed by additional yearly payments over time that may even increase in value, while the cash option is a one-time lump sum that, according to the Pennsylvania Lottery, “includes your share of all the money available in the top prize or jackpot prize pool, after taxes and deductions are withheld.”
Generally, annuity plans will award winners more money over time than a cash payout. Choosing the one-time cash payout may also push winners into a higher income tax bracket, potentially costing them even more in taxes in the long run.
Most states charge a tax on lottery winnings, but a few — including California, Delaware, Florida, Texas and Tennessee — do not. Additionally, those who buy lottery tickets in states they do not reside in likely do not need to pay that state’s taxes on potential prizes, excluding Arizona and Maryland.
Notably, Pennsylvania Lottery winners cannot remain anonymous.
“However, only certain claimant information can be released,” the lottery says on its website. “This assures the public that [Pennsylvania] Lottery winners are real people and that the lottery operates with integrity and transparency.
When are Mega Millions and Powerball drawings?
Mega Millions drawings are conducted at 11 p.m. Eastern Standard Time Tuesdays and Fridays. You can watch it by tuning into your local television station or streaming it online at megamillions.com.
The current Mega Millions jackpot, valued at roughly $1.1 billion as of March 26, would be worth $525.8 million in cash before taxes. The odds of winning the jackpot are roughly 1 in 302.6 million, Mega Millions says.
Powerball, meanwhile, conducts drawings at 10:59 p.m. Eastern Standard Time every Monday, Wednesday and Saturday. Broadcasts stretch from roughly 11 to 11:25 p.m. and are available to watch on local television stations or through Powerball’s website, powerball.com
Powerball’s current jackpot as of March 26, roughly $865 million, holds an estimated cash value of $416.1 million before taxes. The chances of winning the Powerball jackpot are about 1 in 292.2 million, the game’s rules say.
Both Mega Millions and Powerball task players with correctly choosing six numbers. Mega Millions requires players to select five numbers between one and 70 and another between one and 25 (for the golden Mega Ball), while Powerball offers five numbers between one and 69 and another (the red Powerball) between one and 26.
The games cost $2 per ticket, though an additional $1 option can multiply any potential winnings.
Players in Pennsylvania can take several steps to limit their gambling. The state lottery recommends setting budgets online, scheduling cool-off periods or self-excluding from online games, among other strategies.
If you or someone you know has a gambling problem, help is available by calling 1-800-522-4700.
