The Mega Millions jackpot grew to more than $1.6 billion on Aug. 9, 2023.
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State taxes can be hefty
“None of these winners think about taxes until they have a third of it going right to Uncle Sam and the state government,” said Andrew Stoltmann, a Chicago-based lawyer who has represented several lottery winners.
None of these winners think about taxes until they have a third of it going right to Uncle Sam and the state government.
Eight states — including California, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming — don’t levy income taxes on lottery winnings.
However, you must redeem the winning ticket in the state where you bought it, meaning an out-of-state purchase in a high-tax state could trigger a bigger bill.
But the annuity payout could save on future state taxes, depending on where you choose to live, Stoltmann said. The annuity includes an initial sum followed by 29 annual payments.
Sign and secure the ticket
Lottery winners have a set timeline to come forward and collect their money — and some prizes have gone unclaimed.
“Sign your ticket, take photos and scans and then secure it,” said Michael Whitty, partner at law firm Smith, Gambrell and Russell, who has also advised past lottery winners.
Mega Millions says it’s critical to “protect yourself” by signing the back of your ticket. Otherwise, anyone who holds the winning ticket can file a claim to collect the proceeds.
Alternatively, there may be ways to protect your privacy by claiming the prize money via a trust or limited liability corporation. Regardless, you should consult an attorney first.
Avoid a ‘legal catfight’ on shared tickets
You could also have winning ticket issues when pooling money with friends or co-workers, according to Stoltmann.
“The nastiest legal catfights happen when a group of people buy a ticket together” and one person claims they bought the winning ticket alone, he said.
You should always have a “basic written agreement” that outlines who purchased the tickets, the numbers on those shared tickets and how the group will split the money if there’s a winner, Stoltmann said.
Mega Millions isn’t the only way to win big. The Powerball jackpot has ballooned to an estimated $800 million without a big winner from Saturday night’s drawing. The chances of scoring the grand prize for that game are roughly 1 in 292 million.
