The Powerball jackpot is at one billion dollars!
Literally everyone has dreamed about winning the lottery, and now someone could become the newest billionaire on the block. Or is it? See below to learn which states allow the winner to take home the biggest amount.
by Aline Barbosa
Learn which states in the U.S. offer the biggest amount after taxes.
Some lucky person can become the newest billionaire on the block this week. The Powerball lottery just hit its second-highest prize ever at $1 billion. However, how much of that amount you’ll take home if you win depends on which state you reside. Plus, if it charges taxes on lottery winnings.
The next Powerball draw takes place Monday night. According to the Multi-State Lottery Association – which runs the Powerball – in case there’s a winner, it’ll be the fifth-largest payment in American lottery history. To win, the person must match all numbers from the draw, which are six total.
Powerball winners can choose whether to take the full amount, but as an annuity for a 30 year period. Or, take a lump sum that’s worth about 50% less than the total prize.
Although it might seem illogical to accept less than half of the original amount, many winners choose that route. That is because, after consulting with a financial advisor, they realize they can reinvest the money right away.
Regardless, the actual amount you’d be able to take home depends on the taxes incurred in the state you live in.
Which states would charge less taxes on a Powerball win
All lottery winners must pay federal taxes, and currently, there are only a handful of U.S. states that don’t charge state taxes on lottery prizes. They are: Wyoming, Washington, Texas, Tennessee, South Dakota, New Hampshire, Florida and California.
Other states charge taxes between 2.9% and 8.8% in Powerball or other lottery winnings. So if you live in any of the states depicted above, you’d take home the largest amount.
Federal taxes eat away the most value. Right out of the bat, there’s a 24% withholding tax on lottery winnings. Plus, with such a large amount, you’d likely owe something close to 37% in federal taxes on your tax return for 2022. That is the top rate for people who have the highest income.
According to Powerball, you’d take home about $630 million if you choose the annuity alternative – which pays the most over time. That is, of course, in those states that don’t charge income tax on lottery prizes. If you choose the lump sum, the value decreases significantly, and you’d get $307,5 million.
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