A single lottery ticket sold in Arizona is about to change someone’s life — after the IRS takes a piece of the windfall, of course.
Wednesday night’s Powerball drawing resulted in one ticket matching all six numbers drawn to land the $473.1 million jackpot. The amount was higher than originally anticipated, due to strong ticket sales.
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The advertised figure isn’t what the winner will end up with. Whether the prize is taken as an annuity of 30 payments over 29 years or as an immediate, reduced cash amount, taxes end up consuming a sizable bite out of the winnings.
For this jackpot, a required federal tax withholding of 24% would reduce the $283.3 million cash option — which most jackpot winners choose — by about $68 million.
However, the top federal rate is 37%, so more generally would be due at tax time. For illustration purposes: If the winner had no reduction in income — for example, significant charitable contributions from the winnings — another 13%, or $36.8 million, would be due to the IRS ($104.8 million in all).
There also will be Arizona state taxes withheld, although the exact amount is unclear. The winner will get 180 days to claim the prize.