Lottery fever is currently sweeping the US as Americans eagerly wait to find out who will win the record $1.9 billion Powerball jackpot – the largest prize in history. But how much of it will be left after taxes?
Winners can opt to receive a one-time lump sum payment or an annuity, with the prize being paid out over 30 years. However, most financial reports advise winners to take the lump sum and that is normally what lottery winners tend to do.
In this case, if the winner of the Powerball jackpot decides to choose the lump sum option, they could take home around $929.1 million – but this comes at a price. The winner will owe 24 percent to the IRS in federal tax.
They will also have to pay additional taxes as the large sum of money will put them in the US’ highest federal tax bracket of 37 percent, online news media Fortune reported on Monday.
The lottery winnings would be reported on the Powerball jackpot winner’s 2022 federal income tax return.
For 2022, the top federal income tax bracket applies to single filers who have more than $539,900 in income and joint filers with income over $647,850, according to Kiplinger. Due to inflation, the federal income tax brackets for 2023 have been adjusted upward.
After these taxes are levied on the $1.9 billion, the winner could be left with $492.9 million of the total amount, according to CNBC.
Then there are also state taxes. Currently the states of Alabama, California, Alaska, Delaware, Hawaii, Nevada, Florida, South Dakota, Tennessee, Utah, Texas, New Hampshire, Wyoming and Washington do not levy additional tax on lottery winnings.
However, winners in other locations could end up paying almost 10.75 percent in state or local taxes, according to USA Mega.
The odds of winning the prize are about one in 292.2 million.
California Lottery said late Monday the drawing was delayed because a participating lottery needed more time to complete security protocols.
With no ticket matching Saturday’s winning numbers, the pot was rolled over – leaving countless Americans dreaming big.
Even those who do not usually play the lottery were taking their chances, forming lines at convenience stores around the country to buy their tickets.
The last time someone claimed the Powerball jackpot was August 3, when a lucky ticket holder in Pennsylvania raked in an estimated $206.9 million. Since then, the Powerball jackpot has grown and grown.
While no one claimed the big prize on Saturday, 16 tickets matched the five main numbers to win $1 million each. To get the jackpot, you must also get the Powerball number.
Tickets cost $2 and a winner can choose either a lump sum payment, calculated for this jackpot at $929 million, or opt to be paid in installments over 29 years. Most winners choose the lump sum payout.
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