The Ugly Truth About Lottery Taxes: How Much Do You Actually Keep?
You see the billboard: “Powerball Jackpot: $100 Million.” You start dreaming of buying a $100 million island.
But wait. If you win, you won’t see $100 million in your bank account. In fact, you might not even see half of it. At BallNumbers.com, we believe in being prepared. Here is the breakdown of who gets paid before you do.
1. The “Cash Value” Cut (The First Slash)
As we discussed in our article about Annuities, the advertised jackpot is based on payments over 29 years. If you want the cash now (which 99% of winners choose), the lottery commission immediately cuts about 40-50% off the top.
$100 Million Jackpot → becomes approx. $60 Million Cash Value.
http://googleusercontent.com/image_generation_content/02. Uncle Sam’s Cut (Federal Tax)
Before the check even reaches your hand, the IRS automatically withholds 24% for federal taxes. But that’s not all. Because you are now in the highest tax bracket, you will owe the rest (up to 37%) when you file your tax return in April.
That $60 Million? Now it’s down to about $37.8 Million.
3. Where You Live Matters (State Tax)
This is where geography matters. Depending on where you bought the ticket, the state takes another chunk.
- The Good: States like Florida, Texas, and California do not tax lottery winnings.
- The Bad: New York (8.82%) and Maryland (8.75%) have some of the highest rates.
4. The Final Calculation
So, from a $100 Million Jackpot, a winner in a high-tax state might take home only $30-$35 Million. It is still a life-changing amount of money, but it is a far cry from the number on the billboard.
http://googleusercontent.com/image_generation_content/2Conclusion: It’s Still Worth It
Even after taxes, winning the lottery is a miracle. But knowing these numbers helps you plan realistically. Don’t spend the money in your head before you calculate the taxes.
Ready to beat the odds?
Before you worry about taxes, you need to win first. Use our data tools to pick your next numbers.
Disclaimer: Tax laws change frequently. This article is for informational purposes only. Consult a CPA for professional advice.