For the second time in Powerball’s 30-year history, the jackpot for Monday night’s drawing is an astounding $1 billion.
It is the fifth largest lottery jackpot in US history, falling behind the record payout of $1.586 billion by three Powerball ticket holders in 2016. Powerball said Monday’s jackpot jumped to about $1 billion from $825 million after no tickets matched all six numbers drawn Saturday. However, each winner could see significantly less money than advertised. POWERBALL JACKPOT Hits $1 Billion for Monday’s Drawing Doris Nuttall of Reading checks her 126 Powerball tickets as part of a pool with the Berks County Sheriff’s Office at the Sunoco in Exeter. (Photo by Natalie Kolb/MediaNews Team/Reading Eagle via Getty Images) ((Photo by Natalie Kolb/MediaNews Team/Reading Eagle via Getty Images) / Getty Images) Most jackpot winners choose the upfront, lump sum payment. In this case, that’s about $497 million before taxes. Lottery winners are required to pay a 24% federal withholding tax on their winnings, which would be about $120 million in this case. Additionally, lottery winnings are taxed as ordinary income: The current top tax rate will apply to income above $578,125 for individuals and $693,750 for married couples filing jointly next year. That means winners will have to pay an additional 13% on their winnings, which will bring the total down to about $314 million. You may also owe state taxes on the money, depending on where you live. Tax rates on lottery winnings typically range from about 3% to 11%. There is another way to increase your earnings and reduce the tax hit. Powerball ticket in someone’s hand (iStock / iStock) HERE ARE WEDNESDAY’S $715.1M POWERBALL DRAWING NUMBERS Instead of choosing a lump sum payment, lottery winners can choose the annuity payment plan. The annuity option is 30 annual payments usually spread over 29 years. When you choose this route, you end up with more money because the principal accumulates interest earned over the next three decades, according to TurboTax. The money you haven’t taken out yet is invested for you. Most financial experts advise winners to go with the annuity option, given the history of lottery winners winning millions only to end up bankrupt. GET THE FOX BUSINESS ON THE GO BY CLICKING HERE However, there’s no need to worry too much about the tax hit from winning the lottery. The final payout — regardless of the huge tax hit — is also more money than most Americans see in a lifetime. The odds of matching all six numbers drawn in a Powerball are about one in 292.2 million.