America’s new billionaire – thanks to record-setting $2.04 billion Powerball ticket bought Monday at a gas station in California – may not be a billionaire for a long time.
That’s because the winner, before being announced, must pay federal taxes as well as state and city taxes, depending on where they live.
Nov. 7’s winning numbers they were 10-33-41-47-56. The Powerball was ten.
Lottery winnings are treated as taxable income. Powerball winners, they are told seek financial advice before making a decision, have two options to claim the prize:
- $997.6 million in large amounts.
- About $2 billion in an annuity of 30 graduate payments over 29 years.
Most winners receive a payout. No one chose annuity payments since 2014according to Axios.
What happens to the lump sum payout?
Our winners may also be subject to state taxes, depending on where they live. Some say it’s a lottery winning tax, from 2.9% in North Dakota to 8.82% in New York. Some cities win taxes as well.
What happens with a 29-year annuity?
Alternatively, our winner can take home almost the entire amount inside 30 graduates to pay for 29 years. The premium is calculated to increase by 5% every year.
The money is paid through Treasury bond investments, according to Axios. Bond values increase along with the interest rate on Treasury bonds. High interest rates therefore increase the number of Powerballs – and the public’s interest in playing them.
If the winner dies before the annual payment is made, a portion of the prize continues to be paid to the winner’s property, Powerball says.
And while winners may be tempted to choose the annuity for the first low tax bite and get more Powerball money, inflation and unexpected tax changes in 29 years can eat away at its value. A smart investment can increase its value.
The $2.04 billion Powerball jackpot is the largest in history
Want to buy a Powerball ticket?
TO HELP Janet Loehrke, USA TODAY
SOURCE USA TODAY Network reporting and research; Associated Press; Powerball.com
It was published