How much would you pay in taxes if you won the $1.73 billion Powerball jackpot?
The Powerball jackpot is now the second-biggest in history, standing at $1.73 billion. Know how much you would need to pay in taxes if you won the lottery.
After not drawing a winner since July, the Powerball jackpot has risen to $1.73 billion, becoming the second largest prize in this lottery and the third largest of all lotteries in the United States.
If there is a winner tonight, they will be able to choose between two payment options: annuity or a single cash payment, which corresponds to the cash value of $756.6 million.
However, regardless of the option chosen, the winner will not receive the full amount, since they would still have to pay federal and state taxes.
READ ALSO: Tonight’s winning Powerball numbers
How much would you pay in taxes if you won the $1.73 billion Powerball jackpot?
The $1.73 billion figure represents the amount before taxes that a person would get if they received the prize as an annuity given in a first payment followed by 29 payments that increase 5% each year.
However, most jackpot winners choose the one-time cash payment up front, which in this case is $756.6 million before taxes.
The federal tax rate on any prize over $5,000 is 24%, which would immediately be deducted from your winnings. You would then enter the highest tax bracket, and will have to pay the maximum federal tax rate of 37% the following year.
Additionally, the winner would have to pay state taxes, depending on where they live, since some states do not tax lottery winnings. These are the following:
- California
- South Dakota
- Florida
- New Hampshire
- Tennessee
- Texas
- Washington
- Wyoming
These are the states where Powerball is available and they do not charge state income taxes:
- South Dakota
- Florida
- New Hampshire
- Tennessee
- Texas
- Washington
- Wyoming
READ ALSO: Until what time can I buy tickets to play Powerball?
How much money would you have left after paying taxes if you win the Powerball jackpot?
One-time payment
If you choose a lump sum payment, you will be paid $756.6 million up front, of which 24% would be automatically deducted, leaving you with $575.01 million.
Depending on your filing status for the following year, that amount is also subject to a tax rate of up to 37%, further decreasing your new fortune even before you file your state tax return.
Annuity
According to the Powerball Tax Calculator, in this option your prize would be reduced to $1,089,900,000 after subtracting 37% in federal taxes.
To get an estimate, you can use the Powerball Tax Calculator, choosing the jackpot sum, which is $1.73 billion. Then, choose the state you live in to have the tool calculate how much you will have left, in addition to choosing the payment option: annuity or a lump sum payment.