Explore these Powerball winning frequently asked questions about money, taxes, and making the best financial decisions.
Every time you play Powerball, you’re hopeful that your numbers will, at least in part, match those drawn. And if you’re into dreaming big, you’ll be hoping to bring home the Powerball jackpot. But in addition to a multi-million dollar windfall, do you ever wonder about actually getting your prize money? What about taxes? And is there a right or wrong way to collect your prize - lump sum or annuity? You have questions. Today, we’re highlighting all the FAQs and answers so you know exactly what to expect about prize money and taxes, that is, when you win a Powerball jackpot.
When you win a Powerball jackpot, rest assured the federal government will be taking its portion. For any income over $500,000, the highest federal tax rate is 37%. And that’s right when you present your winning ticket, before claiming your prize money. If you then take the lump sum, the federal government will take 24% off the top of your windfall. And you’re not done. Be prepared to settle up again the following year when you officially file your taxes.
Depending on the US state paying out your Powerball prize, you’ll also have to contend with state taxes. Most states collect some tax, but the percentages vary. For example, Georgia collects 5.75% while New York collects 8.82%. Other states, including Texas, Wyoming, Tennessee, New Hampshire, Delaware, California, South Dakota, and Washington, do not tax any lottery winnings.
When you officially win a Powerball jackpot, it’s best to consult a financial advisor to discuss how you should choose to accept your winnings. Opting for the lump sum payment means paying a larger portion of taxes upfront. But you’ll have immediate access to the lump sum for major purchases and investing as you see fit. Choosing the annuity payments means you’ll enjoy a steady stream of monthly income for several years. You can enjoy the income boost without overspending or investing poorly. But without access to the full amount of your jackpot prize, you’ll have less flexibility to spend.
Typically, there is a 15-day waiting period between the date of the Powerball drawing and the date of the jackpot payout. Money from that game’s ticket sales will be processed before paying out the winner. But essentially, you can come forward anytime to present your winning ticket. Be mindful; however, some states do have time limits for winners to come forward.
Whether or not you have to disclose your identity when you win a Powerball jackpot depends entirely on the state in question. Some states do have disclosure laws that require winners to provide their names and the authorized retailer responsible for selling them the winning ticket. Other states, however, allow winners to come forward anonymously.
After you’ve satisfied the tax burdens and made your decision about how you’ll collect your prize money, you’re all set to enjoy your new lifestyle! Be smart about how you invest and spend your money. And seek the guidance of a professional, financial advisor and accountant included. The goal is to enjoy the windfall you have and to make it last as long as possible.
Now that you’ve had all your Powerball questions answered, you should feel confident in knowing what to do when your numbers align. So, get out there and start playing! Dream big and win big!