Many people are curious about how much money a Powerball jackpot lottery winner takes home after taxes, especially with the increasing payout and record-high jackpot amounts.
Despite the odds of winning the massive prizes being about one in 292.2 million, there have been frequent instances of single-winning Powerball tickets like last year's $2.04 billion, $1.08 billion, and $1.765 billion. According to lottery officials, the most recent $1.326 billion prize is the eighth-largest jackpot in U.S. history.
So, now the question is, how much will the winner take home after tax?
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But, before diving into the details of a winner's tax liabilities, let's review Powerball numbers and payouts.
More from Kiplinger | States That Won't Tax Your Powerball Winnings
Powerball numbers
To win the Powerball jackpot, you must match six numbers from the Powerball drawing. (That's five numbers plus the Powerball.) The drawings take place every Monday, Wednesday, and Saturday at 10:59 p.m. ET.
You can confirm the winning numbers from the last drawing on Powerball's website. If no one matches all six numbers, the Powerball rolls, and the jackpot amount increases.
Next Powerball drawing amount: How much is the Powerball payout?
The advertised cash value of the lottery changes with each drawing. Recently, the jackpot stood at an estimated $1.326 billion. (That's an estimated payout of $621.0 million.)
For comparison, another recent $1.76 billion Powerball jackpot had an estimated cash payout of about $774.1 million.
Powerball taxes: Lump sum payout or annuity?
If anyone wins the Powerball or another lottery prize, they can choose to receive the payout in one of two ways.
- They can receive the payout as an annuity, which would be paid in thirty graduated payments over 29 years, or
- They can receive the money in a lump sum payment.
Most lottery winners choose the lump sum payout.
Note: Opting for the annuity payout could offer a reliable income over time, but it's important to account for inflation. Assuming, for example, an average inflation rate of 2% per year, the real value of your final payment in 29 years would be much lower than your initial payment.
For instance, an annual payment of $33 million today would only have a purchasing power of about $49 million after 29 years, taking some level of inflation into account.
In either case (annuity or lump sum), billions of dollars (as in the case of a recent $842.4 million jackpot) is a bunch of money and $425.2 million (the cash value of that jackpot) is a huge lump sum. So, any lucky lottery winner will also be looking at significant tax bills.
One of those tax bills will be from the federal government and, depending on where a winner lives, another could come from the state. The amount of tax a winner will have to pay will depend on factors including the payout option that the winner chooses and the applicable state tax rate.
That’s because some states don’t tax lottery winnings. Meanwhile, other states have tax rates for lottery winnings that generally range from about 3% to almost 11%.
But in any case, once applicable taxes are taken out, the amount of money that any jackpot winner would walk away with will be much less than the multimillions splashed across lottery news headlines.
Powerball after taxes: How much do you take home?
If you are the lucky winner of a massive jackpot or other lottery cash prizes from a Powerball or Mega Millions drawing, you will want to take some deep breaths and secure and protect your winning ticket. Then, you will likely want to work with a qualified financial advisor to consider and plan for the various tax implications of winning the lottery.
That's because when anyone wins the lottery, the IRS withholds 24% of the winnings off the top. With a large jackpot, if the winner opted for the lump sum cash value, they would be subject to federal income tax at the top tax rate, which is 37%. (So after the 24% off the top, that is another 13% for some winners in remaining federal taxes).
For 2024, the top (i.e., 37%) federal income tax bracket applies to single filers with more than $609,350 in income and joint filers with income over $731,200. Due to inflation, federal income tax brackets are adjusted each year.
State taxes on lottery winnings
On the state side, most states treat lottery winnings as income for tax purposes and the tax rates vary by state.
But the jackpot winner’s state taxes could still amount to a huge sum given the size of the most recent Powerball lottery jackpot.
For more information, see States That Won't Tax Your Powerball Winnings.
Beyond federal and state taxes, some lottery winners face additional tax burdens from local jurisdictions. Some urban centers, counties, and smaller municipalities impose their own taxes on lottery winnings.
For example, NYC residents can be subject to an additional 3.876% tax on their winnings applied on top of Empire State (10.90% withholding) and federal taxes.
Check any local tax requirements specific to your area.
What time is Powerball drawing?
Powerball drawing days are every Monday, Wednesday, and Saturday at 10:59 p.m. ET.
Related: What Time is the Powerball Drawing?
How much is a Powerball ticket?
Tickets are $2 per play. Powerball tickets are sold in 45 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.
Alabama, Alaska, Hawaii, Nevada, and Utah are the five states that do not participate in Powerball.
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