$15M Jackpot But Will Take Home Just $4.5M After Taxes
Ohio Woman Wins $15M Jackpot But Will Take Home Just $4.5M After Taxes — Did She Throw Money Down The Drain?
Bethan Moorcraft Sat, June 22, 2024
Lady Luck was present and accounted for when a woman from Sandusky, Ohio, won big in the state’s 50th Anniversary scratch-off game in June.
The winner, identified only as Jeanne, dropped to the floor when she realized she’d won a $15 million jackpot from a $50 scratch-off card, according to the Ohio Lottery Commission.
When she took the winning card to the clerk at Friendship #83 in Sandusky, they “both just cried,” Jeanne said in a press release. “There were people in line looking at me like I lost my mind.”
Jeanne had two options for how to claim her enormous prize: she could take an annuity of $600,000 for 25 years (which would total $15 million), or she could take a lump sum of about $7.5 million.
She opted for the $7.5 million cash option, a sum that will actually shrink to around $4.5 million, Moneywise estimates, once she’s paid her federal and state taxes.
That $10.5 million difference between the advertised $15 million prize and her eventual winnings begs the question, did she throw money down the drain by picking the lump sum?
Taxing Mega Lottery Wins
The IRS requires all lottery agencies to withhold 24% of lottery winnings over $5,000 for federal taxes. On Jeanne’s $7.5 million purse, this amounts to tax of $1.8 million.
But as lottery winnings are taxed as ordinary income, a windfall of this size would land Jeanne in the highest federal income tax bracket of 37%, meaning she must progressively pay additional tax until she meets the bracket’s threshold. In the end, her total federal tax bill will land at around $2.73 million.
The Buckeye State also taxes lottery winnings like normal income. Jeanne’s $7.5 million lump sum win would place her firmly in the top state income tax bracket of 3.5% for 2024, which would eat approximately $262,000 from her total.
After all that, Jeanne’s total tax liability related to her win alone comes to about $3 million — meaning she’ll only get to enjoy around $4.5 million from her $50 scratch-off win (which is still a stunning return-on-investment).
She has big plans for her winnings. Jeanne says she wants to pay off her best friend’s mortgage, whom she’s stayed with for the past two years, and she’d love to buy a house in Florida.
But could she have achieved those goals and collected more money in the long-run by taking the annuity prize option?
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What If She Took The Annuity?
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https://www.yahoo.com/finance/news/ohio-woman-wins-15m-jackpot-100300295.html