MYRTLE BEACH, SC (WMBF) - Chances are you probably didn’t win the nearly $1.6 billion jackpot, but that Mega Millions ticket does make South Carolina a winner.
Lottery winnings are usually taxed like income. Therefore, winners have to pay federal, state and sometimes local taxes.
Regardless of where the unanimous winner lives, the winnings will be taxed in the state the ticket was purchased, which in this case is South Carolina.
When claimed, the winner can choose to take the prize in a one-time payment or in 29 annual payments.
If the winner chooses the one-time cash option, the sum is reduced to $877.8 million. If the installment option is picked, the winner will receive annual payments of around $51.2 million dollars.
Either options will be subjected to pay 24 percent for federal taxes, an amount that increases for foreigners and if you do not provide a social security number.
Another 7 percent will be taxed for South Carolina state taxes. Only seven other states have higher tax rates on lottery prizes than South Carolina. States like California, Tennessee and Washington don’t tax lottery prizes at all.
South Carolina would earn $107.5 million after the 30 payments, according to U.S. Mega Millions. With the one-time payment option, South Carolina would earn around $61.4 million.
The federal government would earn about $368 million over the years, or $210 million, according to estimates by the U.S. Mega Millions.
These figures are not the final tax burden the individual will have.
Sometimes lottery prizes face local taxes as well. Tuesday’s winning ticket was purchased in Simpsonville. The city did not confirm if the winnings will be subject to local taxes.
The U.S Mega Millions also explained states can also deduct for things like “child support payments, back taxes owed, outstanding student loans, and other government agency responsibilities.”
South Carolina collected $2.3 million in debt set-off and unpaid child support since January 2002.
The winner’s tax situation and additional income can have an impact on the final tax bill.
How will South Carolina benefit?
An employee with the South Carolina Education Lottery said the money the state makes from taxes will go into the state’s Department of Revenue.
The money generated by ticket sales must be used for educational purposes, according to the South Carolina Education Lottery legislation.
South Carolina Education Lottery COO Tony Cooper said Mega Million tickets sales for this round brought in $10 to $15 million.
Cooper explained 43 cents of every dollar goes back into education. For this lottery, that total ranges from $4.3 to $6.4 million.
“It is a big, big win for South Carolina, for the player, for the retailers, but more importantly education," Cooper said during Wednesday’s press conference in Simpsonville.
Since January 2002, the state has put $5.4 billion into educational programs. Most of the lottery funds have been used for higher education programs and scholarships. The remaining 18 percent of funds have financed K-12 programs and community education programs.
The ticket sales revenue is also used for prizes, gaming costs, advertising and retail commissions.
Cooper said stores who sell winning tickets receive 1 percent of the prize, or a maximum of $50,000. This is part of the retail commission.
C.J. Patel, the owner of the store where the ticket was sold, KC Mart #7, said he plans to distribute the $50,000 between his employees.
The winner has 180 days to claim the prize but South Carolina allows winners to stay anonymous, so their identity may never be known.
If the ticket goes unclaimed, South Carolina will still benefit. Cooper explained the money will be distributed between states based on ticket sales.
The winning numbers were 5, 28, 62, 65 and 70, and the Mega Ball was 5.