The Powerball lottery jackpot just rose to a whopping $1.6 billion dollars after no one matched all six numbers this past Wednesday. This is the second largest jackpot in Powerball history, and the odds of winning are about one in 292.2 million. Wednesday’s winning numbers were 2, 11, 22, 35, 60, with the Powerball being 23.
Think you can beat the odds this time? Here’s what you need to know financially if you end up being a lucky winner.
If you’re a Powerball winner, you can choose to receive your cash in lump sum or as an annuity, paid in thirty graduated payments over 29 years. Most prefer to receive their pay out in cash, either because they don't want to wait for their winnings or they think they can earn more money by investing this cash than what the annuity offers. If you do choose to take the lump sum though, it doesn’t mean you’ll walk away with $1.6 billion dollars in the bank.
The next Powerball drawing is Saturday, Nov. 5 at 10:59 pm ET.
The advertised cash value of the Powerball is $782.4 million, and you’ll need to account for more taxes on top of this value as well. To start, when someone wins the lottery, they’ll pay 24% of your earnings to the IRS. This means that your $782.4 million in earnings will be decreased by $187.8 million.
After this, they’ll also be subject to a federal income tax at the top tax rate, which is 37%, as these lottery earnings are included on your 2022 federal income tax return.
This means you'll lose another $101.7 million to taxes, leaving you with $492.9 million.
However, depending on the state you live in, you could again be taxed at the state level. These state tax rates typically range from 3% to almost 11%.
If you do end up winning the Powerball lottery jackpot, you won’t walk away with the whole $1.6 billion, but you’ll still receive a life-changing amount of money. This is why most experts suggest getting a tax attorney and financial advisor to create a financial plan after winning. Still think you can beat the odds? Tickets are $2 and drawings are broadcast every Monday, Wednesday and Saturday. Just make sure you know the tax obligations of winning if you do decide to play.