Winning ticket for Powerball’s record $2.04 billion jackpot sold in California — here’s what will go to taxes

Personal finance

Anadolu Agency | Anadolu Agency | Getty Images

The $2.04 billion Powerball jackpot has a winner — well, two, if you count Uncle Sam.

A single ticket sold in California matched all six numbers pulled in the delayed drawing, which was held Tuesday instead of Monday night due to one state needing additional time to process its sales and play data, according to Powerball officials.

The prize marks the largest ever in lottery history. The jackpot had been rolling higher through thrice-weekly drawings since Aug. 3, when a ticket in Pennsylvania scored $206.9 million.

More from Personal Finance:
Here are the first 3 steps to take if you lose your job
How your credit score affects the cost of a car loan
Affluent consumers embrace second-hand shopping

One of the decisions the winner of this jackpot faces is whether to take the pretax $2.04 billion as an annuity spread over three decades or as a reduced, immediate pretax lump sum of $997.6 million.

If the person were to choose the cash option — which most big jackpot winners do — the ultimate tax bill would partly depend on their state of residence.

California does not tax lottery winnings

While the IRS will scrape 24% — or $239.4 million — off the top for federal tax withholding, California does not tax lottery winnings, according to the state’s lottery winner’s handbook. So if the winning ticket holder lives in the Golden State, no state or local taxes on the windfall would be due.

However, if the winner lives elsewhere, their state of residency would determine what they owe in their jurisdiction. Those levies range from zero to more than 10%, depending on the state.

At the federal level, more than the initial $239.4 million withheld would likely be due at tax time because the top federal rate is 37%.

Unless the winner was able to reduce their taxable income — i.e., by making large charitable donations — another 13%, or $129.7 million, would be due to the IRS. That would be $369.1 million in all going to federal taxes, leaving the winner with $628.5 million.

The Powerball jackpot has reset to $20 million for its next drawing, scheduled for Wednesday night. Mega Millions’ top prize, meanwhile, is $154 million for its Tuesday night drawing.

Articles You May Like

Senate approves bill enforcing railroad labor agreement before strike deadline, sends to Biden
CNN lays off hundreds of staffers after business review − read the memo
2 High Income ETFs Crushing the S&P 500
Why Amazon CEO Andy Jassy didn’t immediately say ‘yes’ when Jeff Bezos offered him the role
Delta is making it harder to get into its airport lounges after they were flooded by travelers