Powerball jackpot grows to $650 million. Here’s the tax bill if there’s a winner

With nary victor for the Powerball jackpot, the prize has jumped to an estimated $650 cardinal up of Monday's drawing. Of course, those winnings volition beryllium smaller erstwhile the IRS takes its share.

The jackpot jumped to $650 cardinal from $615 cardinal without a winning summons connected Saturday. If you bushed the odds, you tin present prime betwixt a lump sum of an estimated $328.3 cardinal oregon yearly payments worthy $650 million.

Your chances of winning the expansive prize are 1 successful astir 292 million.

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"One happening that's unsocial astir the lottery is that you tin judge it implicit a 30-year play with annuity payments," said certified fiscal planner John Chichester Jr., laminitis and CEO of Chichester Financial Group successful Phoenix. "That offers a batch much flexibility successful however you wage the taxes."

Rather than a larger, upfront taxation bill, you tin instrumentality the annuity outgo and put the wealth successful a tax-efficient manner, said Chichester, who is besides a certified nationalist accountant.

Before winners spot a penny of the multimillion-dollar jackpot, there's a mandatory 24% national withholding that goes to the IRS. The withholding applies to winnings of much than $5,000.

If you take the $328.3 cardinal currency option, the 24% withholding automatically reduces your chopped by astir $78.8 million. However, galore taxpayers wrongly presume they're disconnected the hook aft that 24%, Chichester said.

"That 24% comes disconnected the top, but you're inactive liable for the different 13% astatine immoderate point," helium said.

Here's why: Millions successful lottery winnings volition propulsion you into the apical federal income taxation bracket. For 2023, the 37% complaint applies to taxable income of $578,126 oregon much for azygous filers and $693,751 oregon higher for joined couples filing together. (You cipher taxable income by subtracting the greater of the modular oregon itemized deductions from your adjusted gross income.)  

Of course, the 37% doesn't use to each of your taxable income. For 2023, azygous filers volition wage $174,238.25 positive 37% of the magnitude implicit $578,125. As for joined couples filing together, the full owed is $186,601.50 positive 37% of the magnitude supra $693,750.

The remaining taxation measure depends connected respective factors, but could easy correspond millions more.

You whitethorn besides beryllium state taxes, depending connected wherever you unrecorded and wherever you bought the ticket. While immoderate states person nary income taxation oregon don't taxation lottery winnings, others person apical income authorities taxation brackets exceeding 10%. 

Powerball isn't the lone accidental to triumph big. The jackpot for Tuesday night's Mega Millions drawing, meanwhile, present stands astatine $480 million. The accidental of hitting the jackpot successful that crippled is astir 1 successful 302 million.