The Powerball jackpot rose to an $835 million—the fourth largest in the game’s history—after no tickets matched all six numbers drawn on Monday night, although the winner of the prize will receive a far smaller payout after their tax bill.
If a winner emerges in the next draw on Wednesday, they will have to choose between a $835 million payout spread over 30 annual installments or a lump sum amount of $390.4 million—usually the more popular choice.
The lump sum payment will first face a mandatory federal tax withholding of 24%, leaving the winner with $296.7 million.
Depending on their taxable income, the winner could face a federal marginal rate as high as 37%, which would further drop their winnings to around $245.95 million.
If the winner chooses the installments option, the annual payments of around $27.83 million could drop as low as $17.53 million, if the 37% federal marginal rate is applied.
The amount the winner gets to take home will also be determined by their state’s policies, as some states like New York tax lottery winnings at 10.9%, while others like Texas, Florida and California don’t tax them at all.
1-in-292.2 million. Those are the abysmal odds that a Powerball holder will have to overcome to win the jackpot. The Mega Millions jackpot comes with an even worse 1-in-302.6 million odds.
The $835 million is already the fourth largest jackpot this year. Last month, a single ticket sold in Florida won the $1.6 billion Mega Millions jackpot—the largest prize in that game’s history and second largest ever in the country. In November last year, a single Powerball ticket sold in California won $2.04 billion—the largest ever jackpot in the U.S. Over the last decade, both Powerball and Mega Millions have tweaked their formula to worsen a player’s odds of winning while pushing up the jackpot sizes.
Powerball Reaches $785 Million—Here’s How Much The Winner Would Take Home After Taxes (Forbes)