Here's what you need to know if you win the Mega Millions jackpot

The Mega Millions jackpot on Tuesday is worth an estimated $396 million, making it the second time in almost a year that the lottery prize has hit this level. According to Mega Millions, there have been only two Mega Millions jackpot winners in 2021 thus far: one to a Michigan group who won $1.05 billion in January, and the other to a New York couple in February who won $96 million.

$396 million is a hefty jackpot for any prize winner, but according to Mega Millions records, the prize money has reached higher totals; in October 2018, the jackpot hit $1.537 billion, making it the second time ever that a lottery prize surpassed $1 billion.

A winner is bound to draw the lucky combination of numbers to win the jackpot, but winning the prize money comes with some strings attached. 

Total winnings

For example, the jackpot total is an estimated value; however, Mega Millions notes that the estimated cash value of the current jackpot total amounts to $272.3 million in cash. That’s because the difference between the estimated jackpot total and the actual award value is based on trends and — you guessed it — estimates of sales, which cannot be perfectly pinpointed.

“Typically, as much as 70 percent of sales occur on the drawing day, so forecasting precise numbers in advance can be difficult and can be affected by external factors such as the weather,” the Mega Millions FAQs notes. “Changes in both sales and the U.S. Treasuries rate explain why the advertised jackpot amounts are always noted as estimates. Historically, actual winning jackpots have come in at levels above, below and equal to the estimated figures in roughly similar proportions.”

While Mega Millions records show no signs of a Connecticut jackpot winner since the state started offering the game in 2010, if this jackpot does go to a Connecticut resident, they will first have to select a payment option. The CT Lottery website states they have 60 calendar days from the time they present the winning ticket to lottery headquarters to choose their payment option: the cash lump sum is a “one-time payment that is equal to all the cash in the Mega Millions jackpot prize pool,” while the annuity option gives the winner one upfront payment of their winnings and spreads the rest out in graduated payments over 29 years. 

Taxes

The winnings get further complicated by federal and state taxes. According to the CT Lottery, the corporation is required by law to report and withhold federal income tax — which is currently 24 percent — on all winnings valued at more than $5,000. However, CT Lottery notes that this tax rate can increase to 30 percent for certain winnings. Additionally, the Lottery is “required to report to the IRS gambling winnings that are $600 or more, and at least 300 times the amount of the wager.”

Then the winnings are subject to state income tax, which currently sits at 6.99 percent, according to the Lottery; this tax applies to those prizes that either fall into the federal withholding tax category (over $5,000) or are reportable for federal tax purposes ($600 or more).

If a Connecticut resident wins the Mega Millions jackpot and is taxed using the 30 percent federal income tax and the 6.99 percent state tax, the winner would receive about $246,279,600 in prize money after taxes. 

Where the money goes

The amount of taxes taken out of the total prize aren’t the only money question associated with purchasing a lottery ticket. After all, money is spent to buy a ticket and while much of that revenue is put into the lottery prize value, some of those proceeds go elsewhere. 

The CT Lottery provides a breakdown of just how the more than $822 million in prize money won in fiscal year 2020 was distributed, and according to the data, 63 percent of that total money was dispensed in lottery prizes. 

Another 27 percent — or $348 million — of that money was returned to “support the valuable services and programs funded by the state’s General Fund,” according to the CT Lottery, which supports libraries, public health, public safety and education, among other items. The remaining 10 percent was divided between retailer commissions (6 percent) and administrative and operating expenses (4 percent). 

With 1 in 302,575,350 odds of actually winning the jackpot, chances of a Mega Millions win for a Connecticut resident may be somewhat slim. But regardless of who wins, Mega Millions recommends that large-prize winners get professional financial advice to manage their winnings.