Personal Finance

The winner of $768.4 million Powerball jackpot faces big tax bill

Key Points
  • Whether the winner, or winners, take their loot as an annuity spread out over three decades or as an immediate reduced lump sum, taxes will eat up a big piece of their win.
  • Wisconsin, where the ticket was sold, does not allow lottery winners to remain anonymous.
Winning $768.4 million Powerball ticket sold in Wisconsin

The third-largest jackpot in U.S. history has a winner.

A single ticket sold in Wisconsin matched all six numbers in Wednesday night's Powerball drawing to land the $768.4 million top prize. For whoever is holding that valuable slip of paper, life is about to get a bit crazy.

"Everyone who buys a ticket dreams of winning the huge jackpot, but nobody actually thinks they will win, or has a plan in place if they do," said Jason Kurland, a partner at Rivkin Radler, a law firm in Uniondale, New York.

Largest U.S. lottery jackpots

Rank Amount Date won Game Winner locations
1$1.586 billionJan. 13 2016PowerballCA-FL-TN
2$1.54 billionOct. 23 2018Mega Millions SC
3$768.4 millionMarch 27 2019PowerballWI
3$758.7 million Aug. 23 2017 Powerball MA
5$687.8 millionOct. 27 2018PowerballIA-NY
6$656 million Mar. 30 2012 Mega Millions KS-IL-MD
7$648 million Dec. 17 2013Mega Millions CA-GA
8$590.5 million May 13 2013Powerball FL
9$587.5 million Nov. 28 2012Powerball AZ-MO
10$564.1 million Feb. 11 2015Powerball NC-PR-TX

"When I receive that initial call from a winner, I can hear the anxiety in their voice," said Kurland, who helps lottery winners navigate their windfall. "Many of them don't even tell me their real name at first."

The jackpot, originally estimated at $750 million, climbed higher due to strong ticket sales. The chance of winning is 1 in about 292 million.

Of course, the winner won't end up with the advertised amount. Whether they choose to take their loot as an annuity spread out over three decades or as an immediate reduced lump sum, taxes will eat up a large portion of their win.

This is what you do if you win the lottery

Lottery officials are required to withhold 24 percent for federal taxes. However, the top marginal tax rate of 37 percent means the winner will owe much more at tax time. And Wisconsin also will get a piece.

The cash option for this jackpot — which most winners go with — is $477 million. The 24 percent withholding will reduce that amount by $114.5 million.

Assuming the winner had no reduction to their taxable income — i.e., large charitable contributions from their win — another 13 percent, or $62 million, would be due to the IRS. That would be $176.5 million in all going to Uncle Sam.

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On top of federal taxes are state taxes. In Wisconsin, lottery officials will withhold 7.65 percent, or $36.5 million, for state coffers.

Given the sheer size of the jackpot, experts say it's crucial to assemble a team of experienced professionals to help navigate the windfall: an attorney, a tax advisor and a financial advisor.

"There's a big responsibility that goes with having such a large sum of money," said certified financial planner Dan Routh, a wealth advisor at Exencial Wealth Advisors in Oklahoma City. "It would be important to surround yourself with a quality team that's working in your best interest."

Also, the winner should brace for the world finding out who they are: Wisconsin does not allow winners to remain anonymous.

Tax withholding – what it is and how it affects your take-home pay