The Powerball jackpot has surged to a staggering $1 billion, making it the third-largest prize in the game’s history and here’s how much to pay for the Powerball winnings tax.
The next drawing is scheduled for 22:59 ET on Wednesday, and hopeful participants are eager to try their luck.
Important Powerball Winnings Tax Considerations
The Multi-State Lottery Association reported that the current jackpot trails behind two of the game’s record-breaking winnings: the $2.04 billion jackpot in November and the $1.586 billion prize from 2016.
While this jackpot figure is undeniably impressive, winners should bear in mind that the actual amount they receive will be significantly lower due to taxes.
When it comes to claiming the winnings, winners have two options: they can either opt for a lump sum payment of $516.8 million or choose 30 annual payments amounting to $1 billion.
Experts often advise winners to consider the lump sum option, as it allows them to invest the money immediately, potentially maximizing their gains.
The odds of winning the Powerball grand prize are exceedingly slim, at approximately one in 292 million, making it a highly improbable event.
For winnings exceeding $5,000, a mandatory 24 percent federal withholding is applied upfront, which goes directly to the IRS.
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Impact on Prize Amount
For instance, if you choose the cash option of $516.8 million, the 24 percent withholding will automatically reduce your prize by approximately $124 million.
However, it’s vital to understand that this withholding won’t cover the entire tax bill, as the prize money may push the winner into a higher tax bracket, such as the 37 percent tax bracket.
Therefore, the fortunate recipient of the winning ticket will ultimately be presented with two prize choices: an award of $1.08 billion or a lump sum payment of $558.1 million.
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