$2.04 Billion Powerball Winner Will Get $628 Million After Taxes

Yesterday, someone who purchased a Powerball ticket at Joe’s Service Center in Altadena, California, hit the jackpot and won $2.04 billion. This is the largest lottery winning in history. However, the winner won’t be joining the billionaire ranks. This is because winning a lottery in the US is taxable income.

The winner of the Powerball has a choice in how the money is paid out: lump sum or payments over time. If the winner picks the lump sum, the $2.04 billion drops to $997.6 million. To get the full $2.04 billion, the winner would have to pick the 30 annual payment plan. That works out to about $68 million a year. This is all before tax.

Here Comes The Tax Man

Most winners of the Powerball pick the lump sum payment. On the $2.04 billion win, the cash option is really $997.6 million, but the winner won’t get a check for that. Powerball will withhold 24% ($239,424,000) of the winnings as a withholding tax to be remitted to the IRS. That will leave the winner with $758,176,000. However, the top tax rate is 37% and winning the Powerball would definitely put you in that category. So come April 15, 2023, our winner will have to write a check to the IRS for $129,688,000 to make up the difference between the 24% withheld and the 37% tax rate. This would leave the winner with $628,488,000 after federal income tax.

But We’re Not Done Yet!

Now we have to consider State taxes. Seeing that the winning ticket was sold in California, it’s reasonable to assume that the winner lives there. Unfortunately, California has the highest State income tax in the union, at 13.3%. Fortunately, and surprisingly, California does not tax Powerball winnings! If it did, then the winner would have to fork over another $132,680,800 in taxes. Wyoming, Texas, Alaska, Washington, New Hampshire, Tennessee, South Dakota, Nevada, and Florida are the other states that doesn’t tax lottery winnings. If our winner lives in any other State, he/she will have to pay state income tax on the jackpot.