Monday, December 5, 2022
HomeFinancial$1.9 billion Powerball jackpot is up for grabs. This is the tax...

$1.9 billion Powerball jackpot is up for grabs. This is the tax invoice

Mark Ralston | Afp | Getty Photos

Whoever is the subsequent jackpot winner in Powerball will probably be trying on the largest lottery prize ever awarded.

The tax invoice can even be fairly spectacular.

After nobody hit all six numbers drawn Saturday, the Powerball jackpot headed increased. For Monday night time’s drawing, it is now an estimated $1.9 billion if taken as an annuity unfold over three a long time and $929.1 million if obtained as an upfront, lump sum of money — that is almost a $1 billion distinction within the two choices.

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Lately, the annuity possibility is larger than it beforehand was, relative to the money possibility, on account of higher interest rates that make it attainable for the sport to fund bigger annuitized prizes, in response to the Multi-State Lottery Affiliation, which runs Powerball. The money possibility, nonetheless, is pushed by ticket gross sales.

The highest prize has been rolling increased by way of thrice-weekly drawings since Aug. 3, when a ticket purchased in Pennsylvania matched all six numbers drawn to land a $206.9 million jackpot. 

For starters, $223 million can be withheld

So what would that tax invoice be in case you had been to hit the motherlode?

Assuming you had been like most winners and chose the cash option, a 24% federal tax withholding would cut back the $929.1 million by $223 million.

Nonetheless, extra would possible be as a result of IRS at tax time. The highest federal earnings tax charge is 37% and this 12 months applies to earnings above $539,900 for particular person tax filers and $647,850 for married {couples}. Next year, the top rate is imposed on earnings above $578,125 (people) and $693,750 (married {couples}).

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Because of this except you had been capable of cut back your taxable earnings by, say, making charitable donations, one other 13% — or about $120.8 million — can be as a result of IRS. That might translate into $343.8 million going to federal coffers in all, leaving you with a $585.3 million.

State taxes may additionally be due, relying on the place the ticket was bought and the place you reside. Whereas some jurisdictions don’t have any earnings tax — or don’t tax lottery winnings — others impose a prime tax charge of greater than 10%.

In the meantime, in case you had been to decide on the annuitized quantity, it could be taxed because it’s distributed annually and can be topic to then-current tax charges.

The possibility of a single ticket hitting the Powerball jackpot is about 1 in 292 million.

That is a tad higher than the 1 in 302 million probability that comes with Mega Tens of millions, whose prime prize is $154 million ($74.7 million money) for Tuesday night time’s drawing.

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