By CCN.com: One lucky person in Wisconsin just won the $768 million Powerball Lottery. But it comes with a catch: one hell of a tax bill.
The quarter-of-a-billion dollar win is believed to trace back to just one ticket in Wisconsin which matched all six numbers on Wednesday night. The chances of doing so are one in 292.2 million. With no winning ticket since December, the prize pool is the third-largest in US history.
The lucky winner – 24-year-old Manuel Franco of West Allis – will now choose between the $768 million jackpot paid out over 29 years or a lower cash prize of $477 million. Both are subject to taxes at federal and state levels.
While it’s a life-changing sum of money, the winner won’t actually take home half a billion dollars in cash. The US taxman will take a cut first.
The highest federal tax rate of 37 percent applies to all major lottery jackpots. And then there are state taxes too. The top rate in Wisconsin is 7.65 percent. Our winner is looking at an effective tax rate of 44.65 percent, effectively cutting their winnings in half.
So let’s dive into the exact numbers behind Wednesday’s mega win. Let’s assume our lucky Wisconsin winner opts for the $477 million cash lump sum. Almost all lottery winners take this option and it’s slightly easier for tax purposes, too.
Straight off the bat, Uncle Sam will hit the winner with a 24 percent withholding tax. That’s $114,480,000 gone before the money hits their account.
The Wisconsin winner will then pay the remaining 13 percent to round out the 37 percent federal tax rate. That’s another $62,010,000 gone. (Assuming the winner has no deductions on their taxable income this year).
Total tax owed to federal government: $176,490,000
So far, their winnings are down to $300,510,000.
Wisconsin has a tiered tax system with a top rate of 7.65 percent.
So our Wisconsin winner owes a further $36,490,500 of the jackpot to the state tax man.
Total tax paid to federal and state governments: $212,980,500
The winner’s actual jackpot is $264,019,500
Winning the jackpot might sound amazing, but our Wisconsin winner will pay an effective tax rate of 44.65 percent. The result is the jackpot total is almost slashed in half.
Let’s not get too down about it. $264 million is still a life-changing sum of money. And look on the bright side, future winners might one day be able to pay the tax in bitcoin!
Update 4/23: The mysterious $768 million Powerball winner has been revealed as 24-year-old West Allis, Wisconsin resident Manuel Franco. He said that he “pretty much felt lucky” when he purchased the winning ticket.
Last modified: July 2, 2020 8:13 PM UTC