The Powerball jackpot has steadily risen over the holidays and is now $760 million ahead of Saturday’s draw — the sixth largest ever, according to the Multi-State Lottery Association.
But not all winners will take home the same amount of money. If someone wins the current jackpot, the take-home amount could vary by as much as $82.8 million depending on the payout they chose and the state taxes where they live.
While state taxes vary, federal taxes are the same for everyone.
Winners must pay an upfront federal tax of 24% on lottery winnings, although you’d almost certainly pay another 23% when you actually file your tax return. That’s because your winnings would trigger the top tax rate of 37% for 2023, which is $578,125 for a single filer or $693,750 for married couples who file jointly.
State and local taxes vary widely by state, however. They typically range from 3% to 6% but can go up to 10.9% if you live in New York.
However, eight states don’t charge taxes at all:
- California
- Florida
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
If you live in any of these states, you will take home the maximum payout. That works out to $241,012,045 as a cash lump sum or a 30-year annuity totaling $479,911,350, according to usamega.com.
The cash payout is much less than the annuity, but winners typically take the lump sum since the money can be reinvested right away.
Compared to the taxes you might pay in state of New York, that’s a difference of $82,839,990 for the annuity and $41,692,500 for the cash lump sum.
Also worth noting: If you buy a winning ticket outside your state or district, you could owe state taxes where you bought the ticket, as well as in your home state. Generally speaking, your home state will require you to report out-of-state winnings, but it often provides a credit or deduction for taxes already paid to a non-resident state.
State lottery tax laws vary, however, so you’ll want to consult a tax professional if you happen to buy a winning lottery ticket outside your state.
The next Powerball draw is Saturday at 10:59 p.m. ET. If there is no ticket that matches all six balls drawn, the jackpot prize carries over to the next draw. There are drawings every Saturday, Monday and Wednesday.
Players have a 1 in 292,201,338 chance of winning the jackpot prize, according to the Multi-State Lottery Association, which runs the Powerball lottery.
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