Updated

Updated · Forbes · Jul 26

Powerball Jackpot Climbs to $633 Million as Taxes Cut Lump-Sum Payout to $174.7 Million

Updated

Updated · Forbes · Jul 26

Powerball Jackpot Climbs to $633 Million as Taxes Cut Lump-Sum Payout to $174.7 Million

Q: As Powerball crosses the Atlantic, could a U.K. player secretly take home a larger net payout than an American winner?

Yes. Under the current cross-border setup, a U.K. jackpot winner could end up with a larger net payout than many American winners, even though both are playing for the same shared jackpot. The key reason is tax treatment and how the prize is presented. In the U.S., Powerball advertises the gross 30-year annuity value. A $633 million jackpot is not what a winner actually keeps. The lump-sum cash option is about $277.3 million before tax, roughly $210.7 million after the mandatory 24% federal withholding, and closer to about $174.7 million once the top federal rate is accounted for. State taxes can cut it further, unless the ticket is bought in a state that does not tax lottery winnings. In the U.K., lottery winnings themselves are generally not taxed. Powerball’s U.K. operator advertises a net figure in pounds after applying the relevant tax assumptions to the shared pool. That means the U.K. headline number is lower than the U.S. figure, but it is closer to what the winner actually receives. So a U.K. winner would not be getting a bigger share of the jackpot pool than a U.S. winner in a tax-free U.S. state. But compared with an American winner in a high-tax state, the British player could indeed keep more money overall. One important caveat: U.K. winners reportedly must take the prize as a 30-year annuity, while U.S. winners can choose either annuity or lump sum.

Q: With the $633 million Powerball expanding internationally, how much of the advertised jackpot actually reaches a winner's bank account?

A winner would receive far less than the advertised $633 million. In the U.S., that headline figure is the gross annuity value paid over 30 years, not the cash a winner can immediately deposit. If the winner takes the more common lump sum, the payout is about $277.3 million before taxes. The lottery must withhold 24% for federal taxes right away, cutting the check to roughly $210.7 million. Because a jackpot of this size pushes most winners into the top federal tax bracket, the final federal tax bill would likely reduce the take-home amount to about $174.7 million before any state taxes. State taxes can lower that figure further. In states with no tax on lottery winnings, such as Texas, Florida, California and Washington, a winner could keep close to that roughly $174.7 million estimate. In high-tax states, the net could fall by tens of millions more; New York’s state rate, for example, is 10.9%, and New York City can add another local tax layer. If the winner chooses the annuity instead, the prize is paid in 30 annual installments that rise 5% each year. After federal taxes, reporting estimates put the total received over time at about $400 million, again before any state taxes. The international expansion has not changed the actual U.S. payout rules or taxes. What changed is mainly the advertising: the U.S. promotes the gross annuity jackpot, while U.K. promotions highlight a net figure closer to what a winner would actually receive.

3 articles · Updated · Forbes · Jul 26

$633 million is up for grabs in Monday night’s Powerball drawing after no ticket matched all six numbers on Saturday.
A sole winner could choose 30 annual payments or a $277.3 million lump sum, but federal withholding and the top 37% rate would cut that cash option to about $174.7 million.
State taxes could trim winnings further—up to 10.9% in New York—while states including Texas, California and Florida do not tax lottery prizes.
1 in 292.2 million are the odds of hitting the jackpot; six tickets still won $1 million on Saturday by matching the five white balls.
The game’s player pool has just expanded to the U.K., a change that could help jackpots grow faster without altering the odds of winning.