Powerball jackpot hits $725 million. If you win, here’s the tax bill

If you win the current Powerball jackpot of $725 million, you will owe federal taxes on your winnings. The amount of taxes you owe will depend on the payout option you choose and your state's tax laws.

Mandatory withholding: When you claim your winnings, the lottery will withhold 24% of your prize for federal taxes. This is a mandatory withholding, so you cannot avoid it.

Federal taxes

Additional taxes: After the mandatory withholding, you may owe additional federal taxes on your winnings. This is because lottery winnings are considered ordinary income, and they are taxed at your marginal tax rate. For example, if you are in the top federal income tax bracket, you will owe 37% in taxes on your winnings.

Federal taxes

Lottery winnings are taxed differently in each state. Some states do not tax lottery winnings at all, while others have a flat tax rate or a progressive tax rate.

State taxes

You will need to pay state taxes on your winnings if you live in a state that taxes lottery winnings. The amount of state taxes you owe will depend on the amount of your winnings and your state's tax laws.

State taxes

The total tax bill you owe on your Powerball winnings will depend on the payout option you choose, your state's tax laws, and your marginal tax rate. However, you can expect to owe at least 37% in federal taxes on your winnings. If you live in a state that taxes lottery winnings, you may owe an additional 5% to 11% in state taxes.

Total tax bill

Payout option: Cash option Amount of winnings: $725 million Mandatory federal withholding: $174 million Additional federal taxes: $197 million State taxes: $40 million Total tax bill: $311 million

Here is an example of how much you might owe in taxes if you win the Powerball jackpot:

As you can see, the tax bill on a Powerball jackpot can be significant. It is important to factor in the taxes when you are planning what to do with your winnings.

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