Topline
The Powerball jackpot jumped to $700 million on Thursday after no winning tickets were drawn Wednesday night, making it the 10th biggest lottery jackpot in history, although the winner would take home less than half of that massive sum after taxes.
The Powerball jackpot jumped to $700 million, making it the 10th biggest lottery jackpot in history.
Key Facts
No winning ticket matched the five white balls (31, 43, 58, 59 and 66) and the powerball of 9 Wednesday night, the Powerball announced, sending the jackpot from $653 million to $700 million and the pre-tax cash winnings to $375.7 million.
The winner, who faces odds of one-in-292.2 million to take home the prize, has the choice of taking the money in 30 annual installments over 29 years, starting with an initial payment, or as an upfront pre-tax cash lump sum—a significantly more popular option among lottery winners.
Roughly 24% of the cash winnings would be immediately taken away in an automatic federal tax withholding by the IRS, reducing what the lucky owner of a winning ticket would take home by just over $90 million, to roughly $285.5 million.
The winner also faces a federal marginal income tax rate of up to 37%, meaning that without a reduction in taxable income through tax deductions such as charitable contributions, they would need to set aside another $48.9 million, cutting the prize to nearly $236.7 million.
Tangent
On top of federal taxes, lottery winnings are also subject to state taxes, which vary by state, from as low as 2.5% in Arizona—where the winner would have to surrender another $9.39 million—to 10.9% in New York, where they would have to set aside $40.95 million. In eight states (California, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming), the winner wouldn’t need to pay any additional tax.
Big Number
$2.04 billion. That’s how high the Powerball jackpot reached last November—the biggest jackpot ever, although cash winnings dropped to $998 million while federal taxes brought it down to as low as $629 million, if the winner did not have large tax deductions. The second biggest came in 2016, when the Powerball swelled to $1.58 billion, followed by a $1.53 billion Mega Millions jackpot in 2018.
Key Background
Last month, a winning ticket holder in Maine matched all six numbers in the Mega Millions to win a $1.35 billion jackpot, although federal taxes brought it down to $456 million, while a 7.15% state tax reduced it to $405 million.
Further Reading
$2.04 Billion Powerball Winner Takes Home $628 Million After Taxes (Forbes)
Source: https://www.forbes.com/sites/brianbushard/2023/02/02/powerball-jackpot-reaches-700-million-heres-what-the-winner-would-take-home-after-taxes/