According to CNBC, That estimated $1.5 billion prize is only if the winner opts to take the winnings in 30 payments over 29 years. If you want the money now in one lump sum, the jackpot is a mere $930 million, a cut of 38 percent.
Next up is the federal tax bill. Lottery winnings are taxed as ordinary income.
“If they win the jackpot, they’re going to be subject to the highest federal tax rate of 39.6 percent,” said Melissa Labant, director of tax advocacy for the American Institute of Certified Public Accountants. “It’s a lot more significant than folks expect.”
The U.S. government automatically withholds 25 percent of such large prizes if the winner is a citizen or resident with a Social Security number. For someone choosing the lump sum, that reduces take-home winnings by $232.5 million. Residents who don’t have a Social Security number, or fail to provide one, will have 28 percent withheld and foreigners, 30 percent.
Winners will have to pony up the remaining 14.6 percent in federal taxes come tax time in April 2017. That’s a bill of roughly $135.8 million you don’t want to forget about amid early splurges.
So after federal taxes, you’d be left with about $561.7 million.
Tallied up, a state and local tax bill could shave as much as another 15 percent — $139.5 million — off the lump sum, she said. That reduces your net winnings to as little as $422.2 million. (Those taxes may not be withheld, so factor that in as another tax bill come due next April.)
Still, it’s still better than having no money!!!