Winning the Powerball lottery jackpot requires a ticket holder to match six numbers from the Powerball drawing. The next drawing is today (Saturday, October 29), and the chances of someone winning the $800 million Powerball jackpot are about one in 292.2 million.
But stranger things have happened with recent lottery drawings. For example, lottery officials point out that the Powerball has been hit six times so far this year. So, that has a lot of people thinking about how much money the lucky winner of the Powerball jackpot would take home—after taxes, that is.
Who Won the $700 Million Powerball?
No one won the $700 million Powerball after Wednesday’s drawing, so the Powerball jackpot has climbed to $800 million for Saturday’s drawing. The $800 million prize on the line October 29, is the second largest in Powerball history and is the fifth largest in U.S. lottery history, according to a Powerball news release.
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How Much Money Will the Powerball Jackpot Winner Receive?
The cash value of the Powerball lottery for tonight’s Saturday drawing is $383.7 million.
Whoever wins the Powerball lottery jackpot can opt to receive the payout in one of two ways. They can receive the prize as an annuity, which would be paid in thirty graduated payments over twenty-nine years, or they can receive the prize money in a lump sum payment.
While $800 million sounds like a bunch of money (that’s because it is for most people) and $383.7 million is a lot of cash, Saturday’s lucky Powerball lottery winner (if there is one) will also be looking at hefty tax bills.
One of those tax bills will be from Uncle Sam and depending on where the Powerball winner lives—another could come from the state. The exact amount of tax that the winner will have to pay will depend on factors including the payout option that the winner chooses and the applicable state tax rate. (Some states don’t tax lottery winnings. Other states that do, have tax rates for lottery winnings that generally range from a little over 3% to almost 9%).
So, the amount of money that the Powerball jackpot winner will walk away with will be a lot less than the $800 million that’s splashed across lottery news headlines.
How Are Lottery Winnings Taxed?
So, if you’re the lucky winner of Saturday’s Powerball jackpot, you will want to take a couple of deep breaths and then work with a qualified financial advisor to consider and plan for the tax implications of winning the lottery.
When anyone wins the lottery, the IRS withholds 24% of the winnings off the top. With this Powerball jackpot, if the winner opted for the lump sum cash value of $383.7 million, they would be subject to federal income tax at the top tax rate, which is 37%. The lottery winnings would be reported on the Powerball jackpot winner’s 2022 federal income tax return.
On the state side of things, most states treat lottery winnings as income for tax purposes and the tax rates vary by state. But the winner’s state taxes could still amount to a hefty sum given the size of Saturday’s $800 million Powerball lottery jackpot.