Two Lucky Players Win $687.8 Million Powerball Jackpot – But How Much Money Are They REALLY Taking Home?
Trying your luck in the lottery is not uncommon in the United States. Millions of people make small sacrifices and buy lottery tickets every week for a slim chance of snatching the million-dollar jackpot. But whether they win or not, at least they have something to be hopeful about. But can you blame these people for choosing to bet on lottery games? After all, winning a jackpot is the easiest way of becoming a millionaire – or even a billionaire overnight.
Imagine if you actually won the Powerball jackpot. It’s hard to even think about what you’ll do with that kind of money. But, for two lucky bettors from Iowa and New York, their wildest dreams came true when they won the lucky draw on October 27.
After more than five months, the Powerball jackpot of $687.8 million finally found its deserving winners, who bet on the following combination: 8, 12, 13, 19, 27, and the Powerball number 4. The two winners beat the near-impossible odds of 1 in 292 million and became millionaires instantly. Now that’s what we call luck.
Take note that the amount is the third largest prize in the Powerball history, so the two lucky players will have to split the winnings equally, leaving them with a hefty sum of $343.9 million each, which is still pretty impressive. However, little do these winners know that they’re not entitled to the entire amount that was advertised by the lottery organizers, thanks to the massive tax cuts they will be facing in the future.
Law firm Rivkin Radler’s Jason Kurland said lottery winners usually end up surprised to find out how much tax is withheld from their prize money. Whether they choose to claim their money as an annuity or a lump sum, they will have to face significant tax cuts, often in millions, which can drastically reduce their wealth. Those who already have an idea about the effect of taxes on lottery winnings won’t be surprising to read this, especially since the Powerball jackpot grew to its third largest amount in the history.
Assuming that the winners will claim their winnings as a lump sum, they each get $198.1 million first as opposed to the $343.9 million they are entitled to if they choose annuity. Out of this, less than $200 million – or a whopping 24 percent – will be deducted by the federal government in the form of taxes. But that’s not all. If there’re changes made to tax bill in the future, it could result in even more slashes in their prize money.
With their newfound millions, the winners fall in the highest tax bracket where those earning over $500,000 are expected to pay a 37 per cent federal tax. So each winner’s initial take home of $198.1 million will be reduced by $73.3 million, leaving both of them with just $124.8 million in winnings. That’s a little sad.
But wait, there’s more. The winners will also face state taxes based on their residence. For Iowa, the state tax accounts for 5 percent of the total amount, but people in the highest tax bracket are expected to pay 8.98 per cent to their state, meaning there will be more deduction from the winning in the future.
Following the state tax rules of Iowa, where the two winners are from, their prize money will drop by $17.8 million. So the remaining $124.8 million will just become a scanty $107 million.
For the New Yorker, meanwhile, the state withholds 8.82 percent of the win, and that is $17.5 million. So what is left of $198.1 million will be $107.3 million, which is the takeaway for the winner. However, the reductions do not stop there. Local taxes may apply, depending if they live either in Yonkers, which will slash a 1.32 percent, or New York, 3.88 percent.
Winning the lottery sounds so glorious and heavenly, however, if you think about the taxes to be deducted, you’ll realize that a chunk of the total has been subtracted. For the two winners, they are looking at a more or less 45-percent deduction from their winnings.
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