On Wednesday, the Powerball jackpot surged to $930 million, ranking as the seventh largest grand prize ever awarded in the game’s history.
Jackpot Overview
The nearly $1 billion prize is payable over 30 years as an annuity. Most winners, however, opt for a lump‑sum cash payment, which would be $429 million before any taxes are deducted.
Federal Tax Withholding
The Internal Revenue Service automatically withholds 24 % of winnings over $5,000. For a $429 million cash option, that withholding reduces the payout to roughly $326 million, sending $103 million straight to the Treasury.
When the winner files the 2025 tax return, an additional 13 % federal tax applies because the windfall pushes the recipient into the top 37 % bracket. After this second tax hit, the net prize stands at $283.6 million.
State Tax Landscape
State tax rates on lottery winnings vary widely. North Dakota levies 2.9 % while New York imposes 10.9 %. Residents of California, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming pay no state tax on lottery winnings.
If a ticket is bought in a state different from the winner’s residence, that state may withhold state taxes. Winners can usually claim a credit for taxes paid to the other state, mitigating double taxation.
Unclaimed Winnings
Millions, if not billions, of dollars remain at risk when winning tickets go unclaimed. Understanding who ultimately receives the prize is essential for both winners and state agencies.
Pool Winnings and Gift Tax
Joining a lottery pool introduces additional tax responsibilities. TurboTax warns that the person claiming the prize on behalf of the group must document that the entire windfall is not theirs, or they could be liable for withholding on the full amount.
If the winner collects the total prize and then distributes shares, the IRS may view the distribution as a gift. Gifts exceeding $13.99 million for an individual or $27.98 million for a married couple trigger a 40 % gift tax for 2025.
Legal Guidance for Winners
Attorney Andrew Stoltmann notes that many legal disputes arise from office lotto pools that go awry. He advises that every participant sign a written contract outlining their share, which can be presented to the IRS if needed.
Winning the jackpot also invites scrutiny from tax professionals, financial advisors, and estate‑planning attorneys. “It’s all about protection and paying the least amount of taxes possible, so working with professionals is very important,” says certified financial planner John Chichester Jr., founder and CEO of Chichester Financial Group in Phoenix.
Chichester adds that winners who select the 30‑year annuity option may enjoy “a lot more flexibility” for tax planning.
Stoltmann’s Perspective
Attorney Andrew Stoltmann has represented 12 lottery winners, many of whom lost their winnings through poor investments, reckless spending, and relatives who demanded a share. “Unfortunately, the people who win the lottery think at that point, the journey is over. And what they don’t realize is that the journey has really just begun,” says the Chicago‑based lawyer.
Key Takeaways
- The Powerball jackpot reached $930 million, the seventh largest in history.
- A $429 million cash option is reduced to $326 million by 24 % federal withholding and further to $283.6 million after 2025 taxes.
- State tax rates range from 2.9 % to 10.9 %, with some states exempting winners.
- Pool winnings can trigger gift taxes if not properly documented.
- Professional guidance is essential to navigate the complex tax and legal landscape.
The $930 million jackpot illustrates not only the thrill of a life‑changing win but also the intricate web of federal, state, and gift taxes that winners must confront. Proper planning and expert advice can help preserve the majority of the prize and prevent costly legal entanglements.
