$830 million; call a tax man, launch into space
SIOUX FALLS, S.D. (KELO) — The $830 million Mega Millions Jackpot could operate the city of Sioux Falls for just over a year.
The fiscal year 2023 proposed operating budget is $646.2 million, so with $830 million, you’d have some left to build a few new city pools, fix more potholes or even build a baseball stadium.
The $830 million is more than South Dakota’s total budget reserve. You know, the one that the state keeps depositing annual budget surpluses in each year. The total budget surplus, or reserve was $307.1 million in 2021.
If a lottery winner has a baby and gives that baby $830 million that baby could spend at least $10.2 million a year until death which is as of today is 79 years for the average American.
A winner could also attempt to out-launch Elon Musk into space. Musk’s SpaceX flights have been estimated to cost $67 million and around $97 million. Or the winner could simply pay for a bunch of flights on SpaceX.
The $830 million jackpot as of 1:30 p.m. on July 26 is less than the $1 billion spent on video lottery in South Dakota in fiscal year 2021, according to the state. People spent about $26 million on lotto tickets during the same year.
Exactly how much the Mega Millions jackpot winner gets depends on whether or not it’s taken in a lump sum or in annual payments.
A lump sum payment means the winner will get $487.9 million, not $830 million, according to the Mega Millions website. The federal tax rate of 24% will immediately be applied.
Tim Ness of Ness Tax and Bookkeeping said that 24% “is like a withholding out of a payroll check.”
The 24%,or about $117 million, is subtracted from the $487.9 million. So, now the lottery winner has less to spend., but still about $376 million.
But that 24% may not be all the winner pays.
A lottery win will likely “boost you into the highest tax bracket at 37%,” Ness said. “You will pay additional dollars in at the end of the year unless you choose to withhold more at the time (of receiving the jackpot payout).”
Even at $376 million, the winner still has a lot of money. It’s still more than the total state budget reserve. It’s enough to launch a person into space or buy a whole lot of real estate.
An expansion of the Cherapa Place in downtown Sioux Falls is a $160 million investment, according to developers. $376 million in lottery winnings could get you a multi-story retail and hotel complex.
People aged 65 to 74 spend the most on lottery tickets, according to August 2019 information from the U.S. Bureau of Labor and Statistics.
With the jackpot so high, it could prompt co-workers to buy a pool of tickets with the plan to split winnings.
A group of co-workers won a $543 million Mega Millions jackpot in 2018.
Ness said of a work pool wins the Mega Millions each member of the pool should report their tax identification number and address with the lottery when the winning ticket is presented to lottery officials.
That is a way to avoid any future complications with taxes so that the individuals can pay their fair share of taxes.
“Sometimes that doesn’t happen in real life,” Ness said of individuals in a group win reporting individual tax identification.
Ness said it’s a good idea for lottery winners who win thousands or millions to contact a tax accountant to make sure they are prepared to pay the correct amount of taxes.
“You know, $10,000 or $15,000 may put you in another tax bracket,” Ness said.
A tax accountant can also work with financial planners to help a lottery winner set up a plan for the money.
Ness said the business has worked with some lottery and casino winners. “But this (possibility) is different,” Ness said of the Mega Millions amount.