Sorry Powerball winners, but there’s no way you will be walking home with the entire 1.6 billion in your pocket.
Wednesday, Jan. 13 marked the largest Powerball prize ever recorded as it reached the astounding amount of 1.6 billion dollars. Three winners were announced shortly thereafter, and although no one has come forward to claim their winnings, we know that the winning tickets were sold in California, Florida, and Tennessee.
Due to the fact that there have been three winners, the cash prizes automatically drop from 1.6 billion to just around 530 million per person. If these recipients decide to take a lump sum rather than annual payments over 30 years, their winnings will drop from 530 million to 325 million.
Next come the taxes: the winners are subject to the highest tax bracket. They are hit with the whooping 39.6 federal tax rate. And like a majority of people do, deciding to take the lump sum cuts your pocketed money from 325 million to a mere 196 million.
The U.S. government automatically withholds 25 percent of such large prizes if the winner is a citizen or resident with a social security number. For someone choosing the lump sum, their winnings are reduced by another 81 million dollars, creating a total of 115 million.
Winners will have to pony up the remaining 14.6 percent in April when federal taxes are demanded. That's a bill of roughly 47 million dollars, leaving a grand total of 67 million dollars.
Furthermore, local income taxes vary depending on which state you live in, but regardless of which state that is, the taxes further reduce the winnings.
The best way to minimize your tax hit would be to sit down with a tax planner after you win, but before you claim the prize money publicly, you should figure out a plan based on what you want to do with the money. People like the idea of winning, they must acknowledge the reality of paying taxes.