Whenever a lottery jackpot reaches some astronomical number, as the Powerball will Saturday, it’s fun to let your mind wander for a bit. What would you do with all that money? How would you handle the pressure? Would you rush out and buy a new house and sports car, or make some wise investments that will set you up for the rest of your life?
In some cases, you might even be able to do all of the above.
But how much would you actually take home?
If someone were to win this weekend’s $625 million (and counting!) Powerball prize, for example, do you ever wonder how much money that person would actually receive?
There are a lot of variables here, but a report from Fox Business broke it down, saying that if the prize is accepted all at once, it would be valued at about $380.6 million. About $91.3 million of it would automatically be withheld in federal taxes, bringing the total down to $289.3 million.
Here are some things to consider, should you win:
- Your take-home amount depends on whether you’d take a lump-sum prize or an annuity payment, which is paid out over about 30 years.
- Fewer people, by the way, opt for the annuity payment, in which the lottery winner receives one immediate payment and 29 consecutive ones. The amount paid increases by 5 percent each year, according to the report.
- You could expect the IRS to tax the winnings at the highest federal income bracket, which now sits at 37 percent for people who make more than $500,000 a year. And then you’d end up owing any difference left between that tax rate of 37 percent and the federal withholding rate of 24 percent -- or 13 percent -- when you file your return at the end of the year, Fox Business said.
- It all comes down to where you live. Keep in mind, the winnings could be subject to state taxes, which could be as high as 8.82 percent.
- The jackpot is not subject to the 3.8 percent net investment income tax, according to Fox Business.
- If you’re feeling charitable, you can give up $15,000 to as many people as desired without tax consequences, under the current law.
This weekend’s drawing is reportedly the fourth-largest lottery jackpot in Powerball history.
Do you remember when someone in South Carolina, who opted to remain anonymous, won Mega Millions -- which got as high as $1.5 billion -- and decided to take a one-time payment?
That payment was for $878 million, making it the largest jackpot payout to a single winner in U.S. history, CNN reports.
The Fox Business article said the take-home pay for that winner ended up being about $490.6 million.
The odds of winning Saturday’s Powerball are less than 1 in 292 million. Are you deterred at all by the tax situation? Or will you buy a ticket regardless of anything we could say? Weigh in, using the comments!