Lottery jackpots are subject to large federal tax withholdings and, in some cases, state and city taxes, too.
The Powerball jackpot hit 10 figures Sunday night to reach an estimated $1 billion, the second-largest payout in the lottery’s 30-year history, but the lucky winner will take home considerably less cash because of taxes—here’s how much.
Powerball winners can claim their $1 billion prize in two ways, by either taking the whole jackpot in 30 annual payments over 29 years or by claiming a smaller lump sum of cash upfront, which most lottery winners opt for.
The lump sum is estimated to be $497 million, according to Powerball, which would be subject to an initial 24% federal tax withholding of roughly $119.3 million, leaving the winner with about $377.7 million.
The winner would also owe additional taxes at higher brackets: Up to the 37% top federal marginal tax bracket for ordinary income, so for a single taxpayer with no additional income, no dependents and no itemized deductions (like large charitable contributions), they would owe another $64.
