The Powerball has grown to a whopping billion dollars after no one won on Monday night — but, if someone wins Wednesday, how much will this amount to after state and federal taxes?
While $1 billion can sound like a lot — especially since it is the seventh-largest U.S. lottery jackpot and third-largest Powerball jackpot — there are a few factors to consider when understanding how much money someone will actually receive if they win.
The winner must determine whether they want to receive the money in a lump sum or in annuity. If they choose the lump sum, it would be worth $516.8 million before state and federal taxes.
The lump sum will also have to go through federal taxes, which could result in a dwindling $325.6 million depending on the winner’s taxable income and if the marginal federal tax rate is also applied, according to the lottery tax calculator on USAMega.com.
Then there is the Massachusetts 5% state tax. Another $25.8 million would be taken out with the potential for $20.6 million in additional state taxes. This would leave the winner with $279.1 million, according to the site.
On the other hand, if the winner chooses to take the annuity option, where the winner will receive 30 average annual payments totaling $33 million, the initial federal tax will take upwards of $8 million in initial federal taxes and $4 million in additional federal taxes, reducing the annual payment to $21 million.
With the 5% Mass. state tax, an additional $1.6 million is taken from the sum and another $1.3 milllion is taken in additional state taxes — leaving a yearly payment of $18 million. After the 30 payments, the winner will receive $541 million in total.
Winners in California, Florida, New Hampshire, Puerto Rico, South Dakota, Tennessee, Texas, Washington and Wyoming don’t have to pay state taxes on lottery winnings, according to USAMega.com. Winners in Washington, D.C, however, will pay a 10.75% local tax.
The Powerball drawing is scheduled for 11 p.m. ET on Wednesday, July 19. Powerball tickets are $2 each and can be purchased up until 9:50 p.m. Wednesday at Mass Lottery retailers throughout the state.
