Q&A of the Week July 19, 2023

Question

What is the estimated tax bill for the person who wins the $900 million Powerball jackpot?

Answer

The jackpot winner gets to choose between two options:

1. Take the lump sum payout, estimated pretax at $465.1 million.

2. Take 30 years of annual payments, estimated pretax at $900 million.

There is a 24% mandatory tax withholding. If you choose the lump sum payout, tax withholding is estimated at $111.6 million, which brings the earnings to $353.5 million. If you choose the annual payments, tax withholding is estimated at $216 million, which brings the earnings down to $684 million. 

Also, the lottery winner moves to the 37% (highest) tax bracket, which typically requires additional taxes owed.

Jackpot winners are recommended to work with a tax professional, financial advisor, and estate planning attorney. 

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