So the Powerball Lottery Jackpot has been won, but what is going to be the tax hit on such a large amount of money? Of course, the government will not allow you to have this money tax free, and normal tax rates will apply, with some potential leniency involved, but probably not that much.
KSAT makes it clear how this tax would work and how much you would be liable to pay the IRS if you had won the jackpot. Of course, taking into account the fact that the winnings will be shared, and tax rates are different in different states around the United States.
The payments on the tax would be spread out of 29 years, and at the end of each financial year, tax will need to be paid in the millions to cover the winnings. This also means that the jackpot winning money would also be spread out over this time and automatically taxed. So you won’t see the full amount until 30 years have passed. If you want the big money right now, you can claim the cash option, which is $385 on the jackpot. But of course, this would also be taxed making it rather pointless as you can’t exactly have that much in a tax-free savings account.
However the winners take the money, it is considered to be income, and income tax will apply, which is around 35%. This would mean that they owe around $67 million each to the IRS in taxes. A huge amount that is considered jackpot itself.
State taxes will also apply. The Arizona winner will be liable to an additional 5% State Tax, whereas in Missouri it is slightly less at 4%. This means between $8 million and $10 million will be additionally liable from the winners in these taxes.
Adding all of this up means around $78 million in tax and a winnings of $114 million being taken home. Taxes for the rich are set to rise next year too, so the amount of tax liable from these winners will also rise.
Crazy isn’t it.