By Raúl Rodríguez Cota
07 Apr 2024, 17:54 PM EDT
After more than three months without a grand prize winner, a player in Oregon beat the odds and won a $1.326 million Powerball jackpot.
This was the fourth largest jackpot in the history of the game. However, the winner will now have to pay an amount in taxes.
Lottery prizes are considered income by both the federal government and most states, so prizes are subject to state and federal income taxes.
However, there are 13 states that do not impose additional taxes on residents’ lottery winnings.
How much money will the Powerball winner actually receive?
When a jackpot winner collects his money, he must first decide whether he wants to receive his winnings in annual payments over 30 years or receive his winnings in a single cash payment.
If you choose the annuity, eventually, after three decades, you will end up receiving all of the entire jackpot money.
However, most jackpot winners opt for the lump sum payment, meaning they get the cash value of that jackpot.
For the $1.326 billion Powerball jackpot, the cash value was $621 million.
If they collect this way, 24% of that cash value is immediately withheld for federal taxes and given to the IRS.
So, if the Oregon Powerball winner selects the cash option, $149.04 million would be withheld from Saturday’s prize, bringing it down to $471.96 million.
But, because the federal government considers lottery winnings income, hitting such a large jackpot would likely push the winner into a higher tax bracket, where their income is taxed at 37%.
In most states, the tax is taken from the prize money before it is awarded to the winner.
According to USAMega.com calculations, the winner of the $1.326 million Powerball jackpot would receive $329,792,812, if they choose the lump sum option, because the ticket was purchased in Oregon, which has one of the highest state tax withholding rates.
If the $1.326 million winner decides to receive his winnings in a 30-year annuity, his average amount each year would be $23,510,242, according to USA Mega.
This amount increases adjusting to inflation.
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