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Winner Of $1.28 Billion Lottery Could Only Get $433.7 Million After Tax

Winner Of $1.28 Billion Lottery Could Only Get $433.7 Million After Tax

The winning ticket was bought in a suburb of Chicago, Illinois

If there was ever an invention to ruin your fun, it's taxes.

Expecting a big paycheque after a hard month's work? Don't forget to account for that income tax. Got a bonus you were going to use to treat yourself? Boom, it's time to pay your council tax.

Though they have to be paid, that doesn't necessarily make it easier to stomach. One person who no doubt knows this all too well is a lucky lottery winner from Illinois, whose take could drop from an incredible $1.28 billion to $433.7 million, once various taxes are taken into account.

The winning ticket was sold at the Speedway fuel and convenience store on East Touhy Avenue in the Chicago suburb of Des Plaines and earned the buyer one of the largest jackpots in Mega Millions lottery history.

Ohio Lottery Director Pat McDonald praised the winner in a statement, saying: "Congratulations to the Illinois Lottery for selling the winning ticket for the $1.28 billion Mega Millions jackpot. We're eager to find out who won and look forward to congratulating the winner soon!"

The winner does not yet appear to have come forward, so it's unclear whether they'll opt for the prize of $1.28b (£1.05b), which would be paid out over time, or an immediate lump sum of $747.2m (£613.47m).

Most winners opt for the lump sum, so if the latest successful ticket holder follows the trend they could soon be splashing the cash as a millionaire. Not a millionaire with $747.2m in the bank, though.

As US lottery winnings are taxed, the IRS would take up to 37 percent of the winnings, with 24 percent withheld and sent directly to the government. Once the 24 percent has been taken, the prize of $747,200,000 drops to $567,872,000 (£465.7m).

Winners can choose to be paid out over time or get a lump sum.
Koshiro K/Alamy Stock Photo

It's certainly not a figure to scoff at, but the deductions don't necessarily stop there as the federal income tax rate goes up to 37 percent, and the lottery win means the winner would be in that top bracket.

The difference between the 24 percent withholding tax rate and the 37 percent tax rate would result in another deduction of $97,136,000 (£79.9m) in tax. Added together, the federal tax would come in at a staggering $276,464,000 (£226m), leaving the winner with $470,736,000 (£386m).

And they're not done yet!

The ticket was purchased in Illinois, so if we assume the winner was local they would be subject to the state's 4.95 percent state income tax, depriving them of approximately $37m (£30m) in tax.

All in all, the deductions would leave the winner with about $433.7m (£355.6m). I think most people would agree this is still a vastly life-changing amount of money, but it would probably be hard to forget the original amount you could have walked away with, if it weren't for the dastardly tax man.

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Featured Image Credit: PjrStudio / Rut Kipioro / Alamy

Topics: Money, US News

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