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(NEXSTAR) — Mega Millions players are likely well aware of the record-setting prize that’s up for grabs Tuesday night. After going without a winner yet again last week, the jackpot has reached an estimated $1.1 billion.
Even if you beat the jackpot odds (1 in 302.6 million) to win the grand prize, you won’t be an instant billionaire.
It’s all thanks to how a jackpot winner claims their prize, and where they live.
Mega Millions jackpot winners can receive their payout in one of two ways: as an annuity, which is one immediate payment followed by 29 annual payments that grow by 5% each time, or as a lump sum cash payment.
Regardless of the payment method selected, state lotteries are required to immediately withhold 24% in federal taxes. With additional taxes, about 37% of the prize money will be taken out in total.
Certain states also withhold taxes on winnings, while others, like California, don’t withhold any. Even in these states, winners may still find themselves responsible for paying other tax obligations.
If someone wins the Mega Millions jackpot on Tuesday and decides to take the lump sum cash option, they will only get about $346.7 million, according to USA Mega — as long as they live in a state that doesn’t have an additional tax withholding requirement. The cash payout can range from $286.7 million in New York to $332.9 million in Arizona
However, if they chose to get the annual payments, they would receive average annual payments of anywhere between $574.2 million in New York and $662.2 million in North Dakota (or $694 million in states with no tax withholdings) over the next 30 years, depending on where they live.
The winner of last year’s record-setting $2.04 billion Powerball jackpot — the largest lottery prize in U.S. history — received less than $1 billion when accepting his lump sum payout, even though he lives in California, a state that doesn’t automatically withhold taxes on lottery prizes.
In addition to tax withholdings, it’s important to note that the advertised jackpot value — in this case, a $1.1 billion Mega Millions prize — is generally the amount needed to fund an annuity option. So for Tuesday’s drawing, game officials have determined that $550.2 million, listed as the cash option, is necessary to pay a winner $1.1 billion over 29 years, should they select the annuity option.
Though the annuity option will, eventually, end up being a bigger payout than the cash option, most jackpot winners select the lump sum payments. Some financial advisers say that might be a mistake.
Regardless of the actual payout, a winner in Tuesday’s Mega Millions drawing would receive the fourth-largest prize in game history and the sixth-largest lottery prize in U.S. history.
Mega Millions drawings are held at 11 p.m. ET on Tuesdays and Fridays. Tickets start at $2 each, and are sold in 45 states, the District of Columbia, and the U.S. Virgin Islands.
KTLA’s Iman Palm contributed to this report.
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