Powerball players will have another shot at one of the largest prizes in U.S. lottery history this weekend, as the jackpot climbs to an estimated $1.7 billion for Saturday’s draw.
The prize is the third-largest ever offered by Powerball, trailing only the record $2.04 billion jackpot in 2022 and the $1.765 billion prize won in 2023.
Saturday’s draw will also set a new milestone: it will be the 42nd consecutive draw without a jackpot winner, the longest streak in Powerball’s history. The last winning ticket was sold in California in May, when the jackpot was claimed at just over $1 billion.
Powerball, played in 45 states, Washington, D.C., Puerto Rico and the U.S. Virgin Islands, costs $2 per ticket. Players pick five numbers from 1 to 69, plus a separate Powerball number from 1 to 26.
Winners can choose between 30 annual payments, rising 5 percent each year, or a one-time lump sum reflecting the jackpot’s current cash value.
How Much Is The Jackpot Actually Worth?
The cash value for Saturday’s draw is estimated to be $770.3 million before taxes are deducted.
When Powerball reveals its jackpot, such as the $1.7 billion up for grabs on Saturday, that headline figure refers to the annuity value: the total amount a winner would receive if they chose to be paid out over 30 years.
Under this option, the first payment is issued immediately, followed by 29 annual installments that increase by about 5 percent per year, a structure designed to offset inflation.
The lottery funds these payments by purchasing government bonds with the prize pool, using both the principal and the interest earned to make the escalating payouts.
Winners, however, are also offered a cash option, often about half the advertised jackpot. This cash value represents the actual money collected from ticket sales and sitting in the prize pool. The difference reflects the time value of money: a lump sum today is worth less overall than a stream of payments invested and grown over three decades.
Both the annuity and lump sum are subject to federal (and often state) income taxes, but most winners still choose the immediate payout.
How Much Is Tax On The Powerball?
Before other fees are applied, lottery winnings are first subject to a mandatory 24 percent federal withholding tax. Winners must then pay additional federal income taxes based on their marginal tax bracket, which can be as high as 37 percent, reduced by any deductions or credits they qualify for.
On top of federal obligations, state taxes may also apply depending on where the winner lives.
For example, if you are a single filer and choose to take the lump sum and live in New York State, your overall payout would be $478,993,012 with all taxes deducted. Not exactly an amount to be sniffed at, but with one of the highest state tax rates in the country, with a top income tax of 10.9 percent ($77,968,800), you would get quite a lot less than if you lived elsewhere.
State’s with lower tax rates would take less of your winnings, such as Virginia. Here, you’d take home $521,601,812 based on a top 5 percent tax rate, subtracting $35,360,000 from your cash.
If you reside in Florida, Nevada, Texas or in another handful of states with no income taxes, you’d be considerably richer taking home a healthy $556,961,812 as a single filer.
California, the home of several recent winners, has one of highest income tax rates in the country. However, it does not tax lottery earnings, meaning you’d net the same as if you lived in Florida after federal taxes.
Read the full article here
