The Mega Millions jackpot jumped to $940 million Friday. Here's what to expect for the tax bill if you win.
However, the lump sum may be better because you can maximize the prize by investing the proceeds sooner, according to certified financial planner and enrolled agent John Loyd, owner at The Wealth Planner in Fort Worth, Texas.
Either way, you'll need to "have a plan and realize you can run out of money," he said. Working with a team of experts, including a financial advisor, lawyer and accountant, may eliminate some of the pressure when it comes to decisions about future gifts or donations.About $113.4 million immediately goes to the IRS
Before collecting a dollar of the Mega Millions jackpot, there's a 24% federal withholding. Winnings above $5,000 require a 24% mandatory upfront federal withholding that goes straight to the IRS. If you opt for the $472.5 million cash option, the 24% withholding automatically reduces your prize about $113.4 million.
However, the 24% withholding won't cover the entire tax bill because the prize pushes the winner into the 37% tax bracket, Loyd said.
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