The Powerball jackpot has surged to an estimated $1.8 billion ahead of Saturday night’s drawing, making it the second-largest prize in U.S. lottery history. The only jackpot larger was the $2.04 billion won in November 2022. While the headline number is massive, the actual payout will depend heavily on taxes and whether the winner chooses a lump sum or annual payments.
Winners can select between two pretax options: a one-time cash payout or an annuity that begins with an immediate payment followed by 29 annual installments, each increasing by 5%. The estimated lump sum is $826.4 million, while the annuity totals $1.8 billion over three decades. The odds of hitting the jackpot remain slim at about 1 in 292 million, with the next drawing set for 10:59 p.m. ET on Saturday.
Federal taxes will take a large bite out of any winnings. The IRS requires a 24% withholding on lottery prizes over $5,000, meaning the cash option of $826.4 million would immediately be reduced by about $198.3 million. However, the full tax bill will be higher because a jackpot winner is automatically pushed into the 37% federal income tax bracket for 2025.
For that year, individuals earning more than $626,350 and married couples filing jointly with income above $751,600 fall into the top bracket. For single filers, the tax is $188,769.75 plus 37% of the amount over $626,350, while joint filers owe $202,154.50 plus 37% of the amount over $751,600. Since the jackpot winner’s income will far exceed those thresholds, additional millions will be owed when taxes are filed.
The final tax liability depends on factors like deductions and other income, but it’s clear that the federal bill will climb well beyond the initial 24% withholding. State taxes could add even more. While some states don’t tax lottery winnings, others have top brackets exceeding 10%, meaning where the ticket is purchased and where the winner lives can significantly affect the final payout.
Despite the steep odds, Powerball fever is surging nationwide. Meanwhile, the Mega Millions jackpot has also climbed, standing at an estimated $336 million for Friday night’s drawing. That game carries similarly daunting odds of 1 in about 290 million, but the lure of life-changing wealth continues to draw millions of hopeful players.
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