CNN Money has the break down on what you will have to pay if you win the PowerBall Jackpot.
Prize money = taxable income: Lottery winnings are taxed like income, and the IRS taxes the top income bracket 39.6%. The government will withhold 25% of that before the money ever gets to the winner. The rest has to be paid at tax time.
Then there are local taxes. Of the 44 U.S. states that participate in Powerball, all but a handful will take an additional cut of the money, according to lottery statistics site USA Mega.
So if a resident of New York City wins and takes the lump sum, he or she will only get about $502.2 million. The government will withhold about $303.8 million, nearly 40%.
Powerball winners also have the option of collecting their prize money in annual payments, or an annuity.
In that scenario, the jackpot winner will get a small slice of the $806 million up front. Powerball invests the rest and uses the interest to pay out bigger and bigger installments over the next 30 years. Eventually the total could add up to $1.3 billion…before taxes.
The same federal and state taxes still apply, but they’re paid as each installment is distributed.
