Federal and State Taxes Could Slash Your $935 Million Powerball Jackpot By Nearly Half

By Thea Felicity

Mar 29, 2024 09:41 AM EDT

Powerball Jackpot Hits $1 Billion After 3 Months Without A Winner — LOS ANGELES, CALIFORNIA - JULY 18: A California Lottery display shows projected winnings for the next Powerball drawing in a convenience store on July 18, 2023 in Los Angeles, California. The Powerball jackpot for the drawing on July 19th is now estimated to be $1 billion after three months of drawings without a winner.
(Photo : Photo by Mario Tama/Getty Images)

A recent increase in the Powerball jackpot to $935 million has attracted the interest of many lottery players, according to USA Today.

However, potential winners need to be aware that they will face considerable tax deductions, which may greatly reduce the amount of money they actually receive. The taxation on lottery winnings also varies, particularly because tax laws are different from state to state.

How Much is the Tax for a $935 Million Powerball Jackpot?

For those lucky enough to win the $935 million Powerball jackpot, the initial excitement may be dampened by not receiving the full advertised amount. Whether winners choose annual payments or a lump sum, taxes are unavoidable and can significantly reduce the final payout.

Federal tax rates for lottery winnings are based on income brackets, with the highest earners facing rates of 37% for incomes over $578,125 and 35% for incomes exceeding $231,250.

Moreover, Lottery USA reports that the lottery organization automatically withholds 24% of the prize, leaving winners accountable for the remainder.

However, the tax implications don't end there. Most states impose their own tax rates for Powerball jackpots. For example, states like New York, Maryland, and the District of Columbia levy some of the highest tax rates on lottery wins, ranging from 8.5% to 10.9%.

To calculate, first, we need to consider both federal and state taxes. Based on the aforementioned, the federal tax withheld would be 24% of $935 million, which is $224.4 million.

Then, let's assume a state tax rate of 10.9% for this calculation. The state tax would be 10.9% of $935 million, which is $101.815 million.

Adding federal and state taxes, therefore, for a $935 million Powerball jackpot, the total tax would be approximately $326.215 million.

On the flip side, lottery winners can breathe a sigh of relief in ten states and territories, as they face no state tax on their windfall. According to Yahoo Finance, states like California, Florida, and Texas, among others, offer a more advantageous scenario for winners, allowing them to potentially keep a larger share of their prize money.

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