Powerball After Taxes: What the Winner Takes Home

You may be surprised how much money you'd actually get to keep.

On Wednesday, Nov. 2, 2022 at 10:59 PM EST, the Powerball drawing will take place. This Powerball drawing is special because the price is $1.2 billion. It's just the second time in the game's history that the big winner would see a prize surpassing $1 billion.

But while the jackpot might be advertised as a $1 billion win, the reality is you are going to take home a lot less than that amount if your numbers come up. The exact amount depends where you live, but here's the details of how much you could expect to hit your bank account if you are the big winner.

Here's how much you'd lose to federal taxes

First things first: If you win the Powerball, you'd get to choose between receiving a lump sum payment or getting your money over time in the form of an annuity. If you opt for the upfront payment, you get a lot less money -- around 51% less than the actual jackpot amount.

No matter which way you take your money, though, the federal government is going to take a cut of it. A total of 24% of your winnings would be withheld under federal law -- but since you'd suddenly be rich if you were a big winner, you'd actually end up getting your tax rate bumped up to 37% (that's the highest tax rate assessed by the federal government). That means you'd have to pay Uncle Sam more on top of the 24% taken out.

So, how much exactly would you end up with? Around $367,899,840 if you opted for the lump sum payment or $756,000,000 if you opt for the annuity that pays out the most money over time. Obviously, that'll still give you plenty of money to put into your savings account -- but not nearly as much as you may have expected.

How much would you lose to state taxes?

Any Powerball winner has to pay federal taxes on their winnings, but that's not necessarily the only chunk of your winnings you end up having to pay out. Depending on where you live, you might owe a cut to your state government as well.

There are just eight states where no taxes are charged on lottery winnings at all:

• California
• Florida
• New Hampshire
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

If you live elsewhere, you'll pay between 2.9% and 8.82% on your winnings. This will further cut into the amount you get to keep -- and the drop in your take-home funds could be substantial.

If you live in New York, for example, you'd pay the highest tax rate in the country -- 8.82%. If you opted for the lump sum, you'd end up with just $316,393,862. Of course, that's still a pretty big payout -- but a whole lot less than the $1.2 billion that's advertised.

Of course, having to pay taxes on lottery winnings is most likely a problem that anyone would like to have. The bad news is, the odds of winning aren't great so it may be worth your while to look into other options for becoming a millionaire.