The federal government will withhold 24% of the winner’s earnings before taxes are paid. This is similar to when the IRS deducts money from your paychecks to pay your annual federal tax debt; the Powerball winner would pay approximately $206 million in taxes and be left with roughly $351 million.
Powerball Winners Tax Rates. (Photo: Forbes)
Powerball Winners will pay 37% Taxes on their jackpot prize
If the winner chose the annuity, the annualized government withholding would be around $8.836 million for 30 years, according to the lottery website USAmega.com. In execution, the amount withheld will differ year to year because your annuity payments begin low and increase by 5% each year to compensate for inflation.
According to an Ascent journal, the Powerball winner will still have to pay taxes at their federal tax rate, which will most likely be the top-tier rate, now 37%. That means that if the winner is single, they will pay 37% on any income over $578,126, and if they are married, they will pay 37% on any income over $693,751. As a result, the Powerball winner will have to pay 37% of their total jackpot money for taxes, leaving them with around $351 million.
READ ALSO: $1 billion Powerball jackpot is up for grabs. Here’s what the winner could owe in taxes
Use the Prizes Wisely and Appropriately!
After all, has been said and done, the lottery winner will have to pay hundreds of millions of dollars in taxes, lowering their prize to either $351 million or $681 million. Fortunately, the ticket was purchased in California, where there are no state taxes on lottery prizes; nevertheless, had it been purchased in another state, such as Maryland, where winnings are taxed at 8.95%, the amount would have been cut even further.
In spite of the quantity of taxes collected from the power ball winners’ prizes, it is an extremely substantial amount of cash that may ultimately alter the economic lives of individuals who are lucky enough to win. Paying taxes as a Powerball winner is a big obligation that should be undertaken.
May all Powerball winners make the most of their winnings and invest it wisely.
READ ALSO: $1.08 Billion Powerball Jackpot Winner Will Get a Big Tax Bill
