Powerball jackpot reaches $1 billion. If you win, here’s the tax bill
The jackpot for Monday night’s Powerball draw is a whopping $1 billion.
The advertised figure represents the pre-tax amount you would receive if you did so get your lucky break distributed as an annuity over three decades. Most jackpot winners, however, opt for the one-time cash upfront payment — which is less than half the amount annuled for this draw, and is also a pre-tax figure: $497.3 million.
The annuity option is higher than before compared to the cash option due to higher interest rates that allow the game to fund larger annuity prizes, according to the Multi-State Lottery Association, which operates Powerball. However, the cash option is driven by ticket sales.
So what would you deposit? Steer if you beat the odds and hit the jackpot?
Assuming you were like most winners and chose the cash option, a 24% withholding tax would reduce the $497.3 million by $119.4 million.
Even more would likely be due to the IRS at tax time. The highest state income tax rate is 37% and applies to income over $539,900 for single taxpayers and $647,850 for married couples this year. Next year the top course is levied on incomes above $578,125 (individuals) and $693,750 (married couples).
That is, if you do not increase your taxable income by e.g. make charitable donations, and another 13% — or about $64.7 million — would go to the IRS. That would mean a total of $184.1 million going into the federal coffers, leaving you with $313.2 million.
Depending on where the ticket was purchased and where you live, government taxes may also apply. While some jurisdictions don’t have an income tax — or don’t tax lottery winnings — others levy a top tax rate of more than 10%.
Even so, the winner would end up with more money than most people see in a lifetime or two.
And of course, you probably don’t need to worry about how much the jackpot would actually bring – the chance that a single ticket will match all six numbers drawn in Powerball is about 1 in 292 million.
Meanwhile, the Mega Millions jackpot is $87 million ($42.8 million cash) for Tuesday night’s draw. The chance of your ticket hitting the jackpot in this game is about 1 in 302 million.
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