The Powerball jackpot went winnerless again on Wednesday, boosting the total prize money to an estimated $875 million for Saturday’s drawing. But how much money will the possible winner actually get?
While the total prize may be nearly $900 million, if someone wins on Saturday, they won’t see nearly as much of that, thanks to everybody’s favorite of life’s three promises: taxes.
If someone is able to get all five numbers and the red Powerball right on Saturday and take their winnings as a lump sum, they will get $441.9 million in a one-time payment before taxes.
So, how much will they pay in taxes?
With the lottery comes a mandatory 24% federal withholding, which is taken from the prize before the winner sees a penny of their new fortune.
So, before a hypothetical winner receives their prize on Saturday, the $441.9 million is cut by $106 million first, leaving them $335.9 million.
However, the 24% isn’t the only tax that the new millionaire will have to pay, as they will also be responsible for an additional 13% tax, thanks to the winnings pushing them into a new tax bracket.
On top of that, depending on what state the winner lives in may also see more money sapped from the jackpot winnings. Some states don’t tax lottery winnings, while others do when exceeding a certain amount, most often $5,000 and sometimes up to 10%.
The other option, though less flashy, is to take the winnings in a payment form, taking the $875 million as an annuitized prize. This would see the winner paid out yearly and would be worth the total amount.
It would also make dealing with taxes much easier, according to certified financial planner John Chichester Jr., founder and CEO of Chichester Financial Group in Phoenix, who spoke with CNBC before Wednesday’s drawing.
“One thing that’s unique about the lottery is that you can accept it over a 30-year period with annuity payments,” Chichester Jr. said. “That offers a lot more flexibility in how you pay the taxes.”
Still, waiting isn’t for everyone, and if you want to pretend you won today and better plan out how you’ll spend your winnings, you can go to Powerball.net to calculate what you would walk away with after taxes.
However, Powerball notes that you should consult a financial expert in the event of a big lottery win to be made fully aware of all your tax obligations and how to proceed.
Keep in mind that your odds of winning the Powerball jackpot are about 1 in 292 million.
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