The Powerball jackpot hit 10 figures Sunday night to reach an estimated $1 billion, the second-largest payout in the lottery’s 30-year history, but the lucky winner will take home considerably less cash because of taxes—here’s how much.
Powerball winners can claim their $1 billion prize in two ways, by either taking the whole jackpot in 30 annual payments over 29 years or by claiming a smaller lump sum of cash upfront, which most lottery winners opt for.
The lump sum is estimated to be $497.3 million, according to Powerball, which would be subject to an initial 24% federal tax withholding of roughly $119.3 million, leaving the winner with about $377.7 million.
The winner would also owe additional taxes at higher brackets: Up to the 37% top federal marginal tax bracket for ordinary income, so for a single taxpayer with no additional income, no dependents and no itemized deductions (like large charitable contributions), they would owe another $64.6 million in additional taxes, leaving $313.3 million before state taxes.
If the winner opts to take the full $1 billion in winnings over 30 years, they will receive annual payouts of $33.3 million on average before taxes.
While the 24% federal tax withholding still applies, it amounts to about $8 million annually, and the additional federal tax (for a single taxpayer with no other income, at today’s rates, which are likely to change) would come to another $4.3 million, leaving the winner with about $21 million per year before state taxes.
10.9%. That’s how much New York taxes lottery winnings, the highest state tax rate in the U.S. Some states don’t tax winnings at all, including those with no state income tax, like Texas and Florida, and those that specifically exempt lottery winnings, like California. Some cities even impose their own income taxes, and in New York City the top rate is an additional 3.87% on top of federal and state taxes.
WHAT TO WATCH FOR
The next Powerball drawing will take place Monday evening on Halloween night. If someone wins Monday, they will take home the fifth largest jackpot in U.S. lottery history, according to Powerball.
It’s only the second time in the lottery’s history that the jackpot has surpassed $1 billion. The largest Powerball jackpot in history was a nearly $1.6 billion prize won in 2016 that was split between three winners in California, Florida and Tennessee. The odds of winning the jackpot are 1 in 292.2 million, Powerball said.