When you win a lottery jackpot, there are two basic ways that your winnings will be distributed: as an annuity or in one lump sum. The choice will impact how much you get and what kind of tax consequences you face.
In general, most winners opt for the lump sum option, even though this means getting a smaller amount of money than if they choose to take their winnings as an annuity over several years. If you are considering this route, you will want to consider your financial situation and consult with an experienced lottery advisor.
Factoring companies and insurance companies often purchase long-term lottery payouts. If you have a lottery annuity contract and are thinking about selling it for immediate cash, you can ask these companies to buy the annuity from you.
State taxes on lottery winnings vary by state, but they can be a large part of the total payout for winners. For example, the jackpot winner for Friday’s Mega Millions drawing will pay an estimated $1.6 billion in state taxes on top of the federal tax of $498 million.
Super-sized jackpots drive ticket sales, not least because they earn the lottery games a lot of free publicity on news sites and television. But to ensure that a jackpot is big enough to carry over to the next drawing, organizers must divert more of their revenue toward it.
As a result, the odds of you winning the jackpot are not as good as they were in the past. However, there are a few strategies that you can use to increase your chances of hitting the jackpot.