The future tax bill that a lottery winner will see has often garnered attention once the windfall has climbed to an eye-popping level.
That has recently been the case with the Powerball jackpot. Its estimated pre-tax value moved above the $1 billion threshold over the weekend, hovering around $1.04 billion on an annuitized basis ahead of Monday evening’s drawing. On a one-time lump-sum basis, it was $478.2 million.
Its size has been growing over 31 drawings.
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For a jackpot of that size, a federal withholding tax would apply to it. That tax, worth 24%, shaves quite a bit of money off the final amount the lucky lottery ticket holder ultimately receives.
The federal income tax also draws from the jackpot later.
It would likely be the highest bracket, which the IRS currently has set for 2023 at 37% for income above $578,125 for non-married individuals. For jointly filing couples, it is at that share for income over $693,750, according to the IRS.
In the event of a one-time cash jackpot payment that makes the 37% bracket come into effect, the winner would therefore see about 13% more go to the federal government after the withholding tax.
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Meanwhile, where a jackpot winner calls home oftentimes brings state income taxes into the play.
In nine states, residents aren’t subject to state-levied income taxes. FOX Business previously reported that they include:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
California, while having an income tax, does not apply state taxes to prizes, according to the California Lottery’s website.
USAMega.com pegged the total that the winner of a $1.04 billion jackpot would see after federal taxes but prior to state taxes at $301.2 million. That would be for the cash payout option.
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The most recent time that the Powerball grand prize was won was in July, when the lottery selected the five white and one red balls for it. It came in at $1.08 billion at that point.
Megan Henney contributed to this report.
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