How much are Powerball prizes taxed? How much do winners pay in taxes?
The odds of winning are 1 in 292 million but that doesn’t stop millions of players taking part for the chance of winnings millions of dollars.
How do you play?
When you play Powerball you need to choose six numbers from two separate pools for the drawing. Players choose five numbers between 1 and 69 for the white balls and one number for a red ball, or Powerball, from 1 to 26.
There are a total of nine ways to win a prize in Powerball, ranging from $4, recovering your initial $2 buy-in plus $2, to the jackpot. Players can increase their prize amounts by spending an extra $1 for the “PowerPlay” option to win two, three, four or even five times as much. However the PowerPlay only applies to non-jackpot prizes below $1 million. Any PowerPlay number doubles the $1 million prize.
Powerball drawings are held every Monday, Wednesday and Saturday at 10:59 p.m. ET. The current jackpot is at a whopping $1.9 billion!
How much do winners pay in taxes?
When someone wins there is the option of being paid in a lump sum or as an annuity plan.
For example, if you won a $1.5 billion jackpot then you would receive $930 million if you took a lump sum. If you chose the annuity plan then the money is spread out over 29 years. The money you haven't yet received is invested, taking you up to the $1.5 billion jackpot.
Taking the lump sum will also mean you will be in the highest band of tax income. As of 2020, this means you'll likely owe the IRS at least 37% in taxes. If the winnings are spread out over 30 years, you may not be in the highest tax bracket each year, depending on the size of your prize and your other income.
All winnings over $5,000 are subject to tax withholding by lottery agencies at the rate of 25%.
What chance is there of winning?
The odds of winning the Powerball jackpot are 1 in 292,201,338, so you’re more likely to win at a slot machine than the grand prize.
To put that into context, there is a 1 in 500,000 chance of being struck by lightning, according to the CDC. That means you will be struck by lightning a whopping 584 times before you win the lottery.
Probably can’t do much with that money considering you would be reduced to a pile of ash.