How much might California’s $2 billion Powerball jackpot winner actually take home?
A Powerball player who bought a $2 ticket at a Southern California gas station matched all six numbers, and now that ticket is valued at an astounding $2.04 billion.
It’s the biggest jackpot prize in U.S. lottery history. But how much might the big winner actually take home?
Here’s a quick breakdown of the difference between a lump sum and an annuity payments, and how federal tax rules will apply to the big winner’s life-changing score.
Lump sum: Hundreds of millions, all at once
If the California winner decides to take the lump-sum payment, the $2,040,100,000 win will be reduced down to just over $1.032 billion, according to the Powerball tax calculator webpage.
Gambling and lottery winnings of more than $5,000 are federally taxed at 24%.
The winnings also count as income, though, and being placed in a higher tax bracket brings more federal taxes, boosting the federal tax to a total of 37%.
California does not have a state tax on lottery winnings.
The winner, in a lump-sum scenario, would therefore be on the hook for approximately $373 million in taxes — 37% of $1.032 million. Of that, close to $248 million would have to be paid right away, with another $134 million due after filing taxes for this year
That would leave the winner with $634,817,101, according to Powerball’s calculator.
Annuity: Tens of millions a year, for three decades
If the winner chooses the annuity option, they would receive a higher amount total, spread out in 30 payments over the course of 29 years.
In this scenario, the $2,040,100,000 winner would still owe 37% in taxes, or just over $750 million, but would not face the lump-sum reduction.
They would be paid roughly $1.285 billion across installments that would increase each year, from approximately $22 million after taxes in the first year to $96 million by the final installment — along the way, seeing the yearly tax withholding increase from about $7.4 million to more than $30 million.
“If you win the jackpot and take the annuity payout, the annual payments will be recorded individually in each tax year, and will count towards your gambling income for that year,” the Powerball website explains.
This story was originally published November 8, 2022 at 12:36 PM.
