Why Michigan Hit The Jackpot In Taxes

OLIVER L. Author

Last Updated: March 15th, 2021

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After working in the gambling industry for over a decade, Oliver spotted an opportunity to setup a resource for lottery bettors. CompareTheLotto.com was founded in 2014 and launched a UK site firstly with a South African following shortly after and USA being launched in 2020.

Note: *The following article is purely for fun. It is based on individual opinions and does not constitute advice. The drawing of lottery numbers is entirely random. Please always gamble responsibly. #Ad. Find out more on our How Our Site Works page.

Back at the start of January, one lucky Mega Millions winner picked off a phenomenal $1.05billion jackpot prize. The news made tidal waves around the world - who was the lucky winner? How would they spend their new-found fortune? Why did the jackpot rollover to such a high amount?

The jackpot hunter, who visited a Kroger store in Novi, Michigan, to buy the numbers that would change their life, is yet to be revealed.

It was a great piece of news for the store too, which scooped a $50,000 flat fee for its part in selling the winning ticket. Charitably, store bosses donated the money to a local food bank.

But how much will the new-found billionaire actually take home after tax? Smarter brainiacs than this writer went through figures.

According to Michigan Lottery spokesman Jake Harris, a 4.25% state tax is applied to the payday. The final amount will depend on how the winner opts to claim their prize. All Mega Millions lottery winners have two options: a graduated annuity (the full $1.05billion) or a lump sum ($776million). The former would rake in $42.7million in taxes, while the latter generates $33million for the state.

The taxation doesn't stop there - there is another 24% in federal taxes to pay, which comes to approximately $186million for the lump sum or $241million for the graduated annuity. That will leave the lucky player with a grand total of around $550million for the cash sum and approximately $715million from the graduated amount after tax.

Where do the taxes go? At a statewide level, a portion of the money generated by the Mega Millions lottery is earmarked for the School Aid Fund, which was set up back in 1981. The organization pledges to support a free public elementary and secondary school system required by Michigan law. Schools throughout the state will receive a portion of the money depending on how many students are in their district - the more student there are, the more money there is to buy books, pay teachers, and provide heating in the colder months.

Here's the kicker, though - the tax authorities cannot tax what is yet to be claimed yet. According to lottery rules, the winner has a year to come forward and claim their prize.

The Mega Millions rollover was on its record 37th draw before the winning numbers finally came in. Despite the eye-watering amount, it only comes third in the USA's biggest ever jackpot totals. In 2016, three Powerball tickets were sold for a share of $1.586billion, while in 2018, a massive $1.537billion was won.

Played in 45 states, the Mega Millions lottery is astonishingly difficult to land - the odds of winnings is one in 302.5 million!

You can see how this stacks up against other lotteries and even compare with our exclusive ComparetheLotto.com Average Jackpot Value Score