How much of that $1.13 billion will NJ’s big lotto winner keep?

Congratulations to New Jersey's newest billionaire! There was just one winner in Tuesday night's $1.13 billion Mega Millions drawing. And he/she bought the ticket right here in New Jersey. (Specifically in Neptune, Monmouth County.)

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Of course, you know the winner is not going to walk away with that full $1.13 billion jackpot prize in their pocket. The federal government wants their cut. The state government wants their share too.

The final jackpot amount is still being tabulated, among the 47 states that participate in Mega Millions. Here's some back-of-the envelope math, powered by USAMega.com, to show how quickly our billionaire will become a measly millionaire once the piper is paid.

Lump Sum vs. Annuity

The first chunk of change will disappear immediately, assuming the winner chooses a "Lump Sum" payout over a "Annuity". The annuity prize is paid over 30 years, with 5% growth per year, and amounts to considerably more total prize money at the end of that time span.

However, the majority of big lottery winners opt to receive one big check. In this case, the cash payout option amounts to $537.5 million. Still a lot of money. But less than half of that $1.13 billion headline.

Federal Taxes

Federal law dictates that all lottery winnings over $5,000 are subject to an immediate 24% tax withholding at the time of payout. In other words, the lottery will immediately send a $129 million check to the IRS.

When the winner files their 2024 taxes, their income will fall in the highest federal tax bracket: 37%. That will require paying another $69,833,188 to Uncle Sam.

The net prize is down to $338,666,812, and we haven't even talked about the great Garden State yet.

State Taxes

In New Jersey, all lottery winnings are subject to an immediate 8% tax withholding. That amounts to a $43 million windfall for the state.

At tax time next year, the winner will fall into the top 10.75% state tax bracket. That will be an additional $14,781,250.

Total state tax owed: $57,781,250. A 0.1% drop in the bucket compared to New Jersey's overall $55.9 billion FY2025 budget.

The "Grand" Total

After all the deductions, the federal taxes, and the state taxes, the net cash prize tallies $280,885,562. Less than a quarter of the huge advertised jackpot.

Of course, that balance does not include additional taxes and fees, garnishments, legal fees, and financial advising costs. On the flip side, the winner would be able to offset some of those tax obligations through donations or by showing gambling losses. (Including the price of the winning ticket — a $2 tax deduction!)

Bottom line: Taxes suck. But $280 million is still an insane amount of instant wealth. Don't spend it all in one place.

Dan Zarrow is Chief Meteorologist for Townsquare Media New Jersey. Check out Dan's weather blog or follow him on Facebook for your latest weather forecast updates.