If you have a winning ticket to Powerball’s $366.7 million jackpot, don’t forget about your silent partner: Uncle Sam.
After nearly two months of high-rolling three weekly drawings with no winners, Wednesday night’s drawing took home the lottery game’s top prize. The ticket was purchased in Vermont, the first time the jackpot has been won in that state.
Of course, the advertised amount is not what the winner will end up with. Whether the award is taken as an annuity of 30 payments over 29 years or as an immediate, reduced cash lump sum, taxes end up being an unexpectedly big loss.
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For this jackpot, a required federal tax withholding of 24% would reduce the $208.5 million cash option – which most jackpot winners choose – by approximately $50 million.
Higher taxes likely after initial federal withholding
However, the top federal marginal tax rate is 37%, which applies to income above $523,600. In other words, there is likely to be an additional tax payable at tax time. For example: If there is no reduction in the winner’s income — for example, significant charitable contributions from winnings — another 13%, or $27.1 million, will be due to the IRS ($77.1 million in all).
Chances of winning the Powerball jackpot: around 1 in 292 million
The Powerball jackpot has been reset to $20 million for the next drawing, which is scheduled for Saturday night. The Mega Millions jackpot, meanwhile, is $360 million ($199.3 million cash option) for Friday night.
The probability of a single ticket matching all six numbers drawn in Powerball is about 1 in 292 million. For Mega Millions, it’s 1 in 302 million.