Life-changing. This is how the winner of the Powerball’s $473.1 million jackpot must describe the news that they had won. The winner, who is based in Arizona, will have the option to claim the money as a lump sum or receive 30 payments over the next 29 years. The benefit of a lump sum is that the person may cash out $283.3 million at once while paying a higher percentage tax – this is money that can be immediately invested in real estate, stock, and various businesses.
Yet, not everyone can manage this kind of money, to begin with. Whichever course of action the anonymous winner chooses, they would still need to pay federal and state tax on either sum. To sweeten the pill, the winner is only one this time around, meaning that the jackpot needs not to be divvied up with others.
How Will Jackpot Be Impacted by Taxes
This is not entirely surprising given that your chances of winning the Powerball jackpot are on the lines of one in 292.2 million. In other words, you have a better chance of being killed by a meteor.
The majority of lotto winners seldom opt for the deferred payment over the course of years and prefer to claim the entire lump sum in one quick go. According to USAMega.com, a website that focuses on online lotteries, should the anonymous person choose to go this way, their winnings will be reduced to close to $179 million. This is on a federal level. Then, Arizona’s own tax of 4.5% will kick in, leaving the winner with close to $162 million.
A possible complication is whether the person is a resident of Arizona or not. For example, a person who bought the ticket in Arizona but doesn’t live there may be subject to a 6% tax in the state, and then again, a subject to tax back in their own state. This is why most people try to purchase lottery tickets in their own states, although not many know about how winnings are taxed.
Taxing Lottery Jackpots Often a Surprise
Most just focus on the end result, which is becoming rich, but this evidently comes with a few caveats. Some states do not charge lottery wins, though, so buying tickets there may be a good idea. Among those are Washington, Wyoming, Tennessee, California, Florida, Delaware, and a few others.
This is far from the biggest jackpot ever won on the game or in any lottery game, with the biggest going to a South Carolina resident who nabbed $1.537 billion in the Mega Millions jackpot. Meanwhile, the Arizona winner has 180 days to claim their prize.