The Powerball jackpot has climbed to an estimated US$900 million (AUD$1.31b) —the seventh largest in US history—after no ticket matched all six numbers drawn on Saturday, the lottery said, but because of taxes, the winner of the next jackpot will take home significantly less.
Key Takeaways
- If a winner is chosen in the lottery’s next drawing Monday night, they have the option to either receive the $US900 million in 30 annual installments over 29 years, before taxes, or take an up-front pretax lump sum payment of $US465.1 million in cash.
- A mandatory federal 24% tax withholding would reduce the lump sum earnings to $US353.5 million, while a federal marginal rate of up to 37%—depending on the winner’s taxable income this year—could reduce it to as low as $US293 million.
- Additionally, lottery winnings are subject to taxes in some states including Arizona, with an additional 2.5% taken (about $US11.6 million in this case) and New York, with an additional 10.9% taken (or about $US50.7 million), plus some cities like New York City impose an additional tax on lottery winnings.
- If the winner opts for the annual installments instead of the lump sum, annual payments will average about $US30 million for the next three decades, but those payouts would drop as low as $US18.9 million after accounting for 37% in federal taxes—assuming Congress doesn’t increase the top marginal tax rate.
- Three tickets won $US1 million in Saturday’s drawing, two of which were in Texas and one in Colorado, according to the lottery.
- Some 89 tickets won either $US50,000 or $US100,000 prizes on Saturday, the lottery said.
Big number
1-in-292.2 million. Those are the odds of winning Powerball, according to the lottery.
The game requires winners to match the numbers of all five white balls as well as the red Powerball.
Key background
This Powerball jackpot is the third largest in its history, trailing behind a $US1.6 billion jackpot in 2016 and a $US2 billion jackpot from last November. The last time a Powerball jackpot was hit was April 19.
Since then, there have been 37 consecutive drawings without a jackpot winner, the lottery said. And it’s not just Powerball: Mega Millions is also rapidly increasing.
For the first time in two-and-a-half years, both Powerball and Mega Millions surpassed the $US500 million threshold together this past week. Mega Millions has climbed to $US640 million after Friday’s drawing.
Winners can take home $US328 million in cash, before taxes, if they buy a winning ticket before Tuesday’s drawing. Both lotteries have worsened their odds in recent years, leading to fewer jackpot winners but larger total prizes.
This article was first published on forbes.com and all figures are in USD.
