$2.04 Billion Powerball Winner Takes Home $628 Million After Taxes (2024)

FAQs

$2.04 Billion Powerball Winner Takes Home $628 Million After Taxes? ›

On the $2.04 billion win, the cash election is really $997.6 million. Tax withholding of 24% amounts to $239.4 million, leaving $758.2 million. But the IRS isn't done yet. Although only 24% is withheld and sent directly to the IRS, our lucky winner will owe a lot more in April of 2023.

Castro claimed his prize in February, choosing to immediately receive nearly $1 billion in cash, which came out to be roughly $628 million after taxes. The alternative option was to collect the full $2 billion prize through an annuity over 29 years, which financial advisors say is usually the better strategy.

The cash prize amount will drop to around $223 million after a mandatory federal tax withholding of 24% is deducted. Depending on the winner's final taxable income, they may face up to a 37% federal marginal rate—further cutting down their fortune to $184.8 million.

You must pay federal income tax if you win

You'll fall into the highest tax bracket in the year you win if you take the jackpot in a lump sum. For 2023 and 2024, this means you'll likely owe the IRS at least 37% in taxes.

There is a winner for the $1.128 billion Mega Millions jackpot, and all six numbers matched a ticket sold in New Jersey. The lucky ticket holder can expect an automatic federal withholding of 24% and state withholding of 8%, but the final bill will be millions more.

Can You Inherit a Lottery Annuity? Yes, in most instances, you can inherit a lottery annuity. Typically, lotteries allow for the inheritance of annuities through the estate administration process in one of two ways.

A lump-sum payment provides a smaller immediate payout, while an annuity spreads payments over several years for a larger overall amount. Selling a lottery annuity can provide a lump sum for immediate financial needs but may result in the sacrifice of future guaranteed income and potential tax advantages.

How About Your Retirement Benefits? Just like SSDI, social security retirement benefits are earned benefits. This means winning the lottery will have no impact on your retirement benefits. But it may impact your taxes on your benefits since lottery winnings have to be reported to the IRS.

It is true that lottery annuities are generally guaranteed, backed by the state or insurance companies that issue them. They offer a steady income over a period, typically 20-30 years, reducing the risk of spending all winnings at once. However, consider inflation and your financial goals before choosing an annuity.

Lottery winnings, considered taxable income, are subject to both federal and state income taxes. The Internal Revenue Service (IRS) imposes a federal tax rate of 24%, and California's state income tax, with rates ranging from 1% to 13.3%, adds an additional layer of taxation.

How much would you take home if you win Powerball? ›

Federal taxes on Powerball wins

If a sole winner of Saturday's prize is taxed up to 37% and lives in a state where the only taxes required are federal, they will take home an estimated $283,346,573 from the cash option, according to Lottery USA's tax calculator.

You would pay 10% on the amount up to $11,600, 12% on the amount from $11,601 to $47,150, and 22% on the rest. If you already have a high taxable income, a large lottery win can push part of it into the highest tax bracket of 37% — but remember, you won't be paying that rate on everything.

The winner will now get to pick between receiving the $1.13 billion payout spread across 30 annual payments in 29 years or a lump sum cash prize of $537.5 million—usually the popular pick among winners. The cash prize will drop to $408.5 million after a mandatory federal tax withholding of 24% is deducted.

If a jackpot prize goes unclaimed, each participating state in the Mega Millions game will get back all the money it contributed. The states use their unclaimed lottery prizes for different purposes, but unclaimed prize money typically remains in a state's lottery fund.

For most, winning the lottery is a distant dream. But for Edwin Castro, it became a reality when he struck gold with a $2.04 billion Powerball jackpot in November 2022, the largest in history. Choosing a one-time lump-sum payment, Castro received an astonishing $997.6 million, just short of a billion.

The Powerball jackpot is officially $1 billion — the fifth-largest prize in the game's history — without a winner from Saturday night's drawing. If you win the grand prize by matching all six numbers, you'll have two payout options: a lump sum of $483.8 Million or annuitized payments worth $1 billion.

After taxes, he reportedly walked away with a lump sum of US$628.5 million on Valentine's Day last year and swiftly became a media darling for how he has been spending his fortune.

In the case of the current Powerball jackpot, the annual annuity payments for $2.04 billion would amount to about $68 million per year for 30 years, says Matheson.

Mega Millions lottery jackpot payout

For example, recent $1.13 billion million jackpot winners will share approximately $537.5 million if they choose the lump sum option, which most people do. The lump sum payout may drop further for some winners after paying their tax bill (more on that below).