(NEXSTAR) — Ahead of Friday’s drawing, the Mega Millions jackpot has reached an estimated $1.35 billion, one of the largest grand prizes in the game’s history — and in the nation.
This jackpot has been brewing since April, when a $20 million prize was won by a ticket sold in Syracuse, New York, just four days after a $483 million Mega Millions jackpot was hit by a ticket sold in Queens.
At an advertised $1.35 billion, the jackpot ranks as the fourth-largest Mega Millions jackpot and the sixth-largest lottery jackpot in U.S. history.
Yet, if you or anyone else is lucky enough to win the jackpot, it’s safe to say you won’t be a billionaire. There are a few reasons for that.
Annuity vs. lump sum
First is the game’s structure. Both Mega Millions and Powerball, the most widely-played lottery draw games in the U.S., list two different values for their jackpots. The first is the big, estimated number, which is referred to as the annuity value, and the second is the cash value — $1.35 billion and $659.5 million, respectively, in the current Mega Millions series.
The cash option is generally considered to be the amount of money necessary to fund the annuity option (a one-time payment, followed by 29 annual payments that grow by 5% each time). So ahead of Friday’s drawing, Mega Millions officials estimate they will have $659.5 million in the prize pool at the time of the drawing, and that that is the necessary amount needed to fund the annuity option.
That means that if you win the jackpot and want your winnings right away, you’ll only receive $659.5 million (technically, it’ll be less than that — more on that in a moment). If you want the largest payout, the $1.35 billion, you’ll want to select the annuity payout. That won’t make you an instant billionaire, but you would receive annual payments averaging $20 million each year.
That still won’t exactly put you at $1.35 billion in the end, all thanks to taxes.
Every lottery is required to withhold 25% of federal income taxes from a prize this large. With additional withholdings, you’ll find about 37% of your winnings going to taxes right away. Then, depending on where you live, you’ll see even more withheld for state taxes.
The largest cash lump sum a winner could receive Friday is about $394 million, according to an analysis by USA Mega. That’s only if they live in one of nine states that don’t have an automatic state lottery tax withholding. Otherwise, they’ll receive between $325.8 million (in New York) and $378.3 million (in Arizona) — about one-third of the advertised $1.25 billion.
If you opt for the annuity option and live in a state without a local lottery tax, you’ll receive roughly $788.6 million over the 30 annual payments. Outside of those nine states, you’re looking at a total prize after 30 payments of between $652.4 million in New York and $757.4 million in Arizona. While larger than the lump-sum payouts, you’re still going to be about $500 million short of the advertised $1.25 billion prize.
Finally, and far less predictable, is the likelihood of another ticket matching the winning numbers.
Even though the odds of winning the Mega Millions jackpot are immensely difficult to beat, someone eventually does. It’s even possible that multiple tickets win the jackpot.
In 2016, three separate tickets — one each sold in California, Florida, and Tennessee — matched the winning Powerball numbers for a $1.586 billion jackpot (the second-largest prize on record). The winners had to split the prize three ways, all opting for a chunk of the $983.5 million cash option, which worked out to about $327.8 million each before taxes. Conveniently, the winners all lived in states that don’t have a state lottery tax.
Experts do say, however, that there are certain numbers you can select when buying your Mega Millions ticket that will help you avoid sharing the prize (though your odds at the jackpot will remain the same, slim rate as everyone else’s).