One lucky person in Oregon won the $1.326 billion Powerball Jackpot during Saturday’s drawing (well, technically Sunday)! The odds of winning the jackpot are 1 in 292.2 million (slightly better than the odds of winning the Mega Millions with 1 in 302.6 million).
Once the winner gets picked, they’ll have a decision to make—claim the $1.326 billion in 30 annual annuity payments or take a one-time, lump-sum cash payment of approximately $621.0 million.
Regardless of the choice made, the winner will see a significant reduction in their windfall once taxes are settled. Both the federal government and the state will claim their portions, leaving the winner with less than the initial jackpot.
What’s the tax bill for snagging a $1.326 billion Powerball jackpot, and what amount will the winner actually get to enjoy? Read on to find out.
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The Winning Numbers for Saturday’s $1.326 Billion Powerball Drawing And A Delay
The delayed drawing for the $1.326 billion jackpot found a winner in Oregon with the following winning numbers: the white balls were 22, 27, 44, 52, 69 and red Powerball 9. For this drawing, the Power Play® multiplier was 3X.
As for when those winning numbers were picked, Saturday’s Powerball drawing was delayed by three and a half hours from their usual 10:59pm EST drawing time. This happened because one state lottery needed additional time to complete the required pre-draw procedures. As soon as the procedures were completed, the drawing was held at 2:29 a.m. ET on Sunday at the Florida Lottery draw studio and live streamed on Powerball.com.
So, despite the very late drawing time on the East Coast, it’s possible the lucky Oregon winner stayed up for the live drawing to see if they’d won. And won, they did.
Now, let’s cover the tax consequences of the winning ticket through both payout options: the total value of 30 annuity payments for $1.326 billion or the lump sum payout of $621 million.
Federal Taxes on Powerball Winnings
Let’s start with some basics on how the federal government taxes Powerball winnings, which are considered taxable income.
Federal Tax Rates
First, it’s important to understand that federal income tax rates range from 10% to 37%. Thus, the amount of your lottery winnings will determine whether the federal tax on those winnings will be on the lower end or significantly higher.
If we focus on large lottery prizes (like Saturday’s $1.326 billion Powerball jackpot), you can see how easily the highest federal tax rate comes into play. For the 2024 tax year, the top federal tax rate (37%) kicks in if your taxable income exceeds $609,350 and you’re single. If you’re married and file a joint tax return, then the top tax rate applies to taxable income over $731,200. As a result, lottery prizes above the applicable threshold amount will be taxed at the top federal tax rate.
Note, however, that most tax rates are scheduled to rise in 2026 (unless Congress steps in to keep them at the current rate). The highest tax rate is set to increase to 39.6% at that point. This change will affect lottery winners opting for payouts over 30 years, as they’ll face the elevated rate on payments made after 2025.
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State Tax Rates
State tax rates can also impact the total taxes a lottery winner owes. Although not every state levies an income tax, the majority do, and lottery winnings would almost certainly push the winner into the state’s highest tax bracket.
Tax rates differ from one state to another, often ranging from the low single digits to just over 10%, which means winners will need to account for this additional tax burden on their prize money.
This drawing’s winner lives in Oregon, which means their winnings will be subject to the top marginal rate for the state: 8%.
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Tax Withholding
Bear in mind that for lottery winnings of $5,000 or more, 24% will be automatically deducted and forwarded to the IRS as a withholding measure for tax purposes. This deduction isn’t an extra charge but rather an advance on the total tax you’re liable for upon filing your federal tax return for the year.
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For example, with a $1 million prize, $240,000 ($1 million x 0.24) would be subtracted from you payout immediately (i.e., you would only receive a $760,000 payment). However, when you file your tax return for the year, you would claim a credit for the amount withheld and $240,000 would be subtracted from your overall tax bill.
There might be additional requirements depending on the state or locality you live in as well. The above only applies to federal income tax withholdings.
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Form W-2G
If you win and collect at least $600 from a lottery in 2024, expect a Form W-2G in the mail by January 31, 2025. The form will list your lottery winnings, federal and state taxes withheld, and other information required by the IRS.
The IRS will also receive a copy of the form. So, make sure you report the proper amount when you file your tax return for any year you receive a lottery payment. If you don’t, the IRS will want to know why the amounts on the W-2G and your tax return don’t match … and you really don’t want to draw the IRS’s attention to your return.
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Filing Your Tax Return
When it’s time to file your federal return, you’ll report any lottery winnings as gambling income on Line 8b of Schedule 1 (Form 1040). [The form or line number could change for 2024 tax returns.]
If you have gambling income, that means you can also deduct any gambling losses for the year … but only up to the amount of gambling income reported on your return. You also have to itemize to deduct gambling losses, which means you can’t claim the standard deduction on your return. As a result, depending on your standard deduction amount, you might be better off skipping the gambling loss deduction.
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Federal and State Taxes On the $1.326 Billion Powerball Jackpot (Apr. 7, 2024)
Now let’s focus on Saturday’s Powerball drawing that picked a winner for an estimated $1.326 billion jackpot. If you’re the lucky winner in Oregon, approximately how much spending money would be left after taxes are paid to the federal government? Let’s do some math.
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Lump-Sum Payout
Most lottery winners opt for a lump-sum amount. If the winner claims the lump-sum, he or she will pay approximately $229.7 million in federal taxes on the lump-sum prize of $621.0 million. About $149.0 million (24%) will be withheld from the payment up front, so the winner will have to pay the rest of the $229.7 million when he or she files a 2024 federal income tax return next year.
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If $229.7 million is subtracted from the $621.0 million lump-sum payment, that leaves about $391.3 million to spend. While that doesn’t sound as nice as $1.326 billion, it’s not too shabby for a $2 investment.
Winner’s State of Residence: Oregon
The winner of this lottery jackpot resides in Oregon and will pay an 8% tax rate, equivalent to $49.7 million. After accounting for both federal and state taxes, the winner will have a total remaining jackpot of $341.6 million.
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Annuity Option
If the winner selects the annuity option, he or she will receive an initial annuity payment when the prize is claimed, followed by 29 annual payments that increase by 5% each year (i.e., a total of 30 annual payments). Assuming the winner is single and receives the first payment in 2024 (approximately $20.0 million), the total federal income tax bill for the first two payments (2024 and 2025) will be based on the current 37% tax rate—for a total of about $15.1 million in tax for that period. (That assumes a 2.5% increase in the tax bracket thresholds from 2024 to 2025.)
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Once the rate jumps to 39.6% in 2026 (and assuming it isn’t changed again later), the estimated total federal income tax for the final 28 years (2026 to 2053) comes to about $506.5 million. So, for all 30 years, the winner can expect to pay a grand total of about $521.6 million in federal income taxes.
When you subtract that amount from the $1.326 billion in total payments, the winner will be left with approximately $804.4 million.
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$1.326 Billion Winner Picked from Oregon
Assuming the Oregon tax rate stays at 8% for the entire 30-year period, the winner will pay about $106.1 million in state income taxes on the jackpot payments.
That means the winner will pay a combined total of about $627.7 million in federal and state income taxes. When you subtract that amount from the $1.326 billion in total payments, the winner will be left with approximately $698.3 million.
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Which Payment Option Is Better?
After seeing the after-tax amounts above, you might be wondering why most people choose to receive their lottery winnings in a lump-sum. After all, isn’t getting $698.3 million better than $341.6 million?
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Not necessarily. The problem with annuity payments is that you have to wait 30 years to get all your money. With the lump-sum option, you get less … but you get it right away. If you invest that money wisely over a 30-year period, you’ll probably end up with far more money in the bank when all is said and done. For example, after 30 years, a $341.6 million investment would turn into approximately $1,526.1 million ($1.5 billion) with a modest 5% rate of return (compounded monthly).
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WealthUp Tip: All tax amounts are estimates based on the listed jackpot amounts. They should not be relied on or considered tax advice. If you do win the lottery, consult with a qualified tax professional right away!
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The vast majority of American dividend stocks pay regular, reliable payouts—and they do so at a more frequent clip (quarterly) than dividend stocks in most other countries (typically every six months or year).
Still, if you’ve ever thought to yourself, “it’d sure be nice to collect these dividends more often,” you don’t have to look far. While they’re not terribly common, American exchanges boast dozens of monthly dividend stocks.
