$366.7M Vermont Powerball Jackpot Winner Tax Deduction

If you have a winning $366.7 million Powerball jackpot ticket, don’t forget about your silent partner: Uncle Sam.

After three weekly draws with no winner over the course of two months, the lottery’s top prize was drawn in a Wednesday night draw. The ticket was purchased in Vermont and this is the first time the jackpot has been won in that state.

Of course, the announced amount is not what the winner will receive. Whether the prize is accepted as an annuity of 30 payments over 29 years or as an immediate, reduced lump sum, taxes end up taking most of the windfall.

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For this jackpot, the required 24% federal tax withholding will reduce the $208.5 million cash option chosen by most jackpot winners by about $50 million.

Likelihood of tax increase after initial federal withholding

However, the maximum marginal federal tax rate is 37% and applies to income above $523,600. In other words, there will likely be additional taxes due at the time of taxation. To put it bluntly, if the winner didn’t have a reduction in income – such as significant charitable contributions from winnings – another 13%, or $27.1 million, would have to be owed to the IRS ($77.1 million in total).

The odds of winning the Powerball jackpot are roughly 1 in 292 million.

The Powerball jackpot has been reset to $20 million for the next draw scheduled for Saturday night. Meanwhile, the Mega Millions jackpot is $360 million ($199.3 million option) for the Friday night draw.

The chance that all six Powerball numbers will match on the same ticket is approximately 1 in 292 million. For Mega Millions, that’s 1 in 302 million.

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