Earning

Mega Millions jackpot reaches $421 million: Here are the best and worst states for taxes on lottery winnings

"This is all mine, why should I have to pay taxes?"

Share
Twenty/20

After no winning tickets matched all six numbers drawn on Tuesday, January 25, Friday's Mega Millions estimated jackpot is $421 million, before taxes are taken out, according to MegaMillions.com.

If there's a lucky winner on Friday, January 28, when the drawing takes place at 11 p.m. ET, the prize would be the 13th largest in the Mega Million's 20-year history.

Depending on where you live, the amount taxes you'll pay on your winnings will vary dramatically. "One of the problems for lottery winners when it comes to paying taxes is they think, 'This is all mine, why should I have to pay taxes?'" says Susan Bradley, a certified financial planner and founder of the Sudden Money Institute in Palm Beach Gardens, Florida.

In some other countries, like Canada and the United Kingdom, lottery winnings are not taxed, says Bradley, who has advised past lottery winners.

In the U.S., all winners have to pay federal taxes. Before you see a dollar, Uncle Sam will take 25% and, when tax time comes around, you'll probably owe more, since the top federal tax rate is 37%. The remaining taxes "will be due in April of 2023," if you were to hit the jackpot tonight, says Bradley.

That doesn't include state taxes. Each state has different rules when it comes to taxing lottery winnings.

Here are the best and worst states to win the $421 million Mega Millions jackpot, according to USAMega.com.

The worst states in which to hit the Mega Millions jackpot

5. Maryland

Top tax rate on lottery prizes: 8.95%
Estimated state tax bill: $26 million

4. Minnesota

Top tax rate on lottery prizes: 9.85%
Estimated state tax bill: $28.7 million

3. Oregon

Top tax rate on lottery prizes: 9.9%
Estimated state tax bill: $28.8 million

2. Tied: New Jersey, and Washington, D.C.

Top tax rate on lottery prizes: 10.75%
Estimated state tax bill: $31.3 million

1. New York

Top tax rate on lottery prizes: 10.9%
Estimated state tax bill: $31.7 million

VIDEO4:2704:27
What to do if you win the lottery

Video by Stephen Parkhurst

The best states in which to hit the Mega Millions jackpot

1. Tie: California, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming

If you're lucky enough to live in one of these states, you'll pay no state tax on your Mega Millions winnings.

In 2018, Shane Missler, a Florida resident who was then 20 years old, hit a $451 million Mega Millions jackpot. He chose to receive his winnings in a one-time, lump-sum payment in the amount of $281.8 million, according to MegaMillions.com.

If Missler had lived in New York and won that same jackpot, he would have had to pay 10.9% to the state of New York, which comes out to an additional tax bite worth $30.7 million, according to USAMega.com.

More from Grow: