Winning the lottery is considered life-changing wealth for many. However, winning the lottery and taking home all the prize money will only remain a dream.
The Powerball jackpot in the United States just topped $1.6 billion in prize money. However, with taxes and different ways to cash out, the bigger question is how much of the $1.6 billion goes to the winner.
The funny thing is, the Powerball lottery winner of $1.6 billion may only take home $492 million. However, there is a catch. $492 million is only available if the winner opts to receive the funds in the cash option.
$492 million if the Powerball winner opts for cash
The Saturday jackpot is considered one of the largest lottery prizes, as it stands at a whopping $1.6 billion. Participants in the jackpot have a very meager chance of winning, as the odds stand at 1 in 292 million.
According to the details from CNBC, the upfront tax option for this drawing is $782.4 million, which is also pretax, and is what the majority of jackpot winners choose.
If you choose the cash option, the winnings would be subject to a 24% federal tax. The winner would be responsible for paying $187.8 million of the record-breaking $782.4 million in up-front debt.
The federal tax rate is 37%. This tax rate applies to the income brackets of $539,900 for individuals and $647,850 for married couples. If the taxpayer manages to make some charitable donations, an estimated $289.5 million would go to the government. This would leave the winner with $492.9 million.
The winner may also have to deal with an additional state tax, and this is based on the location of the ticket purchase and the place of residency. Nevertheless, the amount that the lottery winner takes home is enough to obtain generational wealth.