Powerball Jackpot Tax Calculator (2024)

FAQs

How are taxes calculated on Powerball winnings? ›

State taxes on Powerball wins

There are ten states and territories that do not tax lottery winners. They are: California.

If a winner is found in the next draw, they will get to pick between receiving the $750 million jackpot split over 30 annual payments or a lump sum cash prize of $357.3 million—usually the popular choice. The lump sum prize drops to $271.5 million after a mandatory federal tax withholding of 24% is applied.

Some states also tax lottery winnings, meaning winners in Arizona and New York will need to fork over millions in additional taxes, though other states like California and Texas don't have lottery jackpot taxes.

Senior Contributor. I focus on taxes and litigation. The winning Powerball ticket was sold at Joe's Service Center in Altadena, California, entitling the ticket holder to a massive $2.04 billion jackpot.

Do lottery winnings count as earned income for Social Security purposes? Lottery winnings are not considered earned income, no matter how much work it was purchasing your tickets. Therefore, they do not affect your Social Security benefits.

So, you may ask, "How much do I get if I win the Powerball?" It is about 52 percent of the total jackpot amount (before taxes). For example, if the Powerball jackpot is at $100 million, the cash value would be around $52 million.

If you want your winnings right away, you'll want to select the cash option, but if you want more money in the end, you may prefer the annuity option.

When it comes to lottery prizes, the first thing that happens after you turn in that winning ticket and get your lump sum is that the federal government takes 24% of the winnings off the top. But the payments don't end there. You will owe the rest of the tax — the difference between 24% and 37% — at tax time next year.

If the lump sum payment is chosen, the prize amount will drop to $341.77 million after a mandatory federal tax withholding of 24% is applied. Depending on their taxable income, the winner could face a federal marginal rate as high as 37%, which would further slash the winnings to $283.31 million.

Though many believe the government keeps the money, annuity payments are generally passed to a winner's heirs if they die, according to Annuity.org. In this situation, the remaining assets are distributed to a living beneficiary, or to an estate where the money can be disbursed to a group of beneficiaries.

How long does it take to get your money if you win the Powerball? ›

Your first annuity payment, or the single cash option payment, should arrive within six to eight weeks. There are generally no California state taxes for Lottery prizes, but we are required to withhold federal taxes. With an annuity prize, payments are made based on a graduated or a straight payment structure.

It is true that lottery annuities are generally guaranteed, backed by the state or insurance companies that issue them. They offer a steady income over a period, typically 20-30 years, reducing the risk of spending all winnings at once. However, consider inflation and your financial goals before choosing an annuity.

Lottery agencies are generally required to withhold 24% of all winnings over $5,000 for taxes. If your winnings put you in a higher tax bracket, you will owe the difference between the withholding amount and your total tax.

After taxes, $2.04 billion Powerball lottery winner Edwin Castro walked away with $628.5 million, reports show. With the Powerball and Mega Millions jackpots both inching toward $1 billion, those who play the lottery may be wondering: What was the biggest lottery jackpot ever won?

Most jackpot winners go with the lump sum, which means they get the “cash value” of that jackpot. For Powerball's $1.326 billion jackpot, the cash value was $621 million. Right away, 24% of that cash value is withheld for federal taxes and goes to the IRS, TurboTax explains.

The Powerball annuity provides a guaranteed, growing stream of income for three decades. Powerball jackpot winners have two options when it comes to collecting their prize -- a lump-sum cash payment that's less than the advertised jackpot, or an annuity that spreads the entire prize out over a 30-year period.

Here's how to pick between the lump sum or annuity if you win. The Powerball jackpot officially hit $1 billion on Monday, the game's fifth-largest grand prize. There are two payout options for the lucky winner: a lump sum of $483.8 million or an annuity worth $1 billion.

The cash value option “is the amount of money required to be in the jackpot prize pool, on the day of the drawing, to fund the estimated jackpot annuity prize,” according to the Powerball website. If someone were to pick the annuity option, the advertised prize would be divided over 30 annual payments.