How much tax would you pay if you won the $1.2 billion Powerball jackpot?
National lotteries have been a hot topic since winners of $1.33 billion in mega millions in September. Now another lottery is making headlines, this time the Powerball. The current jackpot stands at $1.2 billion. or $597 million in immediate cash value.
Why is the cash value so much lower? Well, like most other income winnings are subject to tax laws.
Let’s go back to the last winner. One ticket matched all six numbers in the July 29 draw to win the $1.337 billion prize. The final value was higher than the estimate of 1.28 billion, based on actual sales.
“Congratulations to the Illinois Lottery for selling the $1.337 billion Mega Millions jackpot winning ticket,” said Pat McDonald.director of the Ohio lottery, who is currently the principal director of the Mega Millions consortium.
However, after taxes, it was worth it $780.5 million in cash.
The IRS takes most of the winnings
Before the money reached the final winner, the bonus was subject to a 24% federal tax on gambling winnings, as US tax residents must pay a maximum rate of 37% on annual earnings above 539,900 $, so you will be responsible for the 13% difference. between that and the 24% applied to gambling winnings.
The next winner has two choices, they can opt for an immediate cash lump sum and they also have the opportunity to take home the full prize of $1.28 billion before taxes paid over 29 years with 30 annual payments.
The best and worst states to win the lottery
Nine states – Colorado, Illinois, Indiana, Kentucky, Massachusetts, Michigan, North Carolina, Pennsylvania and Utah – have a flat tax rate that is generally around 5% . That means you’ll have to pay around $30 million extra. The exceptions to this are Pennsylvania and Indiana, which would take 3.07% and 3.23% of your winnings respectively.