Powerball Payment Options
If you’re lucky enough to win the lottery, there’s one important decision to make: how to collect your prize.
There are two main ways to do so:
- Getting a lump sum payout,
- Collect your prize in annuity payments over the next 30 years.
Cash Lump Sum
Taking out the entire jackpot is good to get a hold of your money as early as possible – but you will lose a considerable amount to the taxes.
Any winnings above $5,000 attract a 24 percent mandatory upfront federal withholding, which goes straight to the IRS. This means that if the price was $500 million, it would be reduced by $120 million, leaving you with $320 million.
This won’t cover the entire tax bill either – because the jackpot easily subscribes the winner into a higher federal tax rate due to increased net worth. It’s important to note that the winners also need to pay state taxes on top of the federal tax.
Despite the substantial loss, there are some benefits to taking out the entire payment:
- You can access your money quickly and cover pressing expenses,
- You can invest the money so it can grow over time for retirement or other purposes.
Annuity Payments
Instead of taking out the entire prize at once and paying higher taxes, you can opt to receive your prize in annual instalments. The prize is usually paid out in full in 30 years.
The annuity value is paid through government bonds that are purchased with the jackpot’s cash value. The revenue these bonds earn over the annual payments makes up for the difference between cash value and the advertised jackpot value.
On the whole, annuity payments result in a higher payout over an extended period of time. It also prevents overspending, offers better tax benefits, and provides a steady stream of income over three decades.
You can use our Powerball annuity calculator above to see what sort of schedule you’ll be looking at.
Lump Sum vs Annuity – A comparison
| Lump Sum | Annuity Payments | |
| Payout Structure | The winner receives the entire value of the prize in one go. | Payouts are distributed evenly at set intervals until the total amount is distributed. |
| Tax Implications | Federal taxes are due on the total amount you receive if you claim your winnings as cash lump sum. You may also be pushed to a higher tax bracket, which increases your tax liabilities. | Taxes are deferred until the entirety of your winnings are paid out. |
| Investment Opportunities | You can invest large sums of money sooner and capitalize on the returns. | You can invest your money as you get paid and offset the inflation loss from your future payments. |
| Best Suited for | Apt investors who can manage investing a large amount of funds effectively. | Those who seek steady income over the years, or those who are prone to overspending. |
Как правильно использовать
После покупки Powerball многие задаются вопросом о том, как правильно его использовать. Конечно же, для начала тренажер необходимо запустить. Для этого есть два способа: старт при помощи шнурка или движения пальца.
Чтобы произвести запуск шнурком необходимо придерживаться нескольких рекомендаций:
Найти в роторе небольшое отверстие и вставить в него один из концов шнурка.
С помощью большого пальца необходимо медленно начать вращать ротор и в то же время наматывать на ротор шнур, натягивая его
Очень важно следить за тем, чтобы шнурок в это время не провисал, а плотно наматывался на ротор. Прекратить наматывание шнурка нужно тогда, когда не намотанными останутся примерно 5 см
Теперь шар ложится в руку счетчиком к ладони, ротором вверх
Прекратить наматывание шнурка нужно тогда, когда не намотанными останутся примерно 5 см. Теперь шар ложится в руку счетчиком к ладони, ротором вверх.
Взяв шнурок крепко одной рукой, в то же время его необходимо придерживать второй, чтобы он не размотался
Затем резко и быстро его нужно дернуть с такой силой, чтобы шнур вышел наружу. Если это сделано правильно, то ротор должен начать крутиться со скоростью 2000-3000 оборотов в минуту.
Теперь рука переворачивается таким образом, ротор «смотрел» в пол и можно начинать делать постепенные движения кистью
Важно то, что движения должны производиться именно кистью, а не всей рукой. Вначале спешить не стоит
Оптимально будет выполнять один оборот в секунду, это поможет лучше почувствовать ротор. Если движения будут выполняться неправильно, то ротор начнет греметь.
Нагрузка, которую получает рука во время использования тренажера, напрямую зависит от скорости вращения ротора. В этом случае стоит быть очень внимательным, так как набрав большую скорость, тренажер будет пытаться вырваться из руки.
Запуск Powerball
Также запустить тренажер можно пальцем.
Для этого также необходимо придерживаться нескольких рекомендаций.
- Положить Powerball в правую руку, следя, при этом, чтобы отверстие для шнурка было параллельно линии руки. В этом случае сделать стартовое движение пальцем будет намного удобнее и проще.
- Большой палец левой руки устанавливается перпендикулярно линии шнурка, подушечкой вниз.
- После этого на шар необходимо слегка надавить и резки и быстрым движением раскрутить шар, при этом подхватив его правой рукой, в которой он и находится.
Taxes on Powerball Payouts
As we said before, the IRS treats lottery winnings as taxable income, which means that you’ll be paying both federal and state tax.
How lottery winnings are taxed on a federal level
How much you’ll be paying in federal tax depends on your tax bracket and whether you’re a single or joint filer – but your winnings can easily push you to a higher bracket. You can access federal tax rates and calculators via the IRS website.
Let’s say that you’re a single filer making $45,000 a year, and won a whopping $100,000 in the Powerball lottery. That raises your taxable income to $145,000 – and bumps up your marginal tax rate from 22% to 24% (for simplicity’s sake, we assume there are no deductions).
You don’t have to pay 24% on the entire $145,000 though. If, say, the tax bracket that $150,000 is in starts from $95,376, you’ll only have to pay 24% on the income that surpasses it. In this case, that would be $49,624.
This means that you’d owe $16,290 on the first $95,376, and 24% of $49,624. This means that of your $100,000 winnings, you’ll be paying a total of $28,199.76 in federal tax.
How lottery winnings are taxed on a state level
Besides the federal tax, some states will also take a piece of your winnings – how much depends on where you live. The tax rates vary from 0% to 8%, with the State of New York levying the largest tax rate. 9 of 51 states don’t levy any income tax at all:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
If bought your ticket from a state where you don’t ordinarily reside, the state where you bought the ticket and got paid will withhold its taxes.
You can easily calculate both your federal and state tax liabilities using our tax calculator above.
Glossary of Terms
Advertised Jackpot: The total payment a winner would receive should they choose the annuity option for any given drawing. This number is based on the funds in the prize pool (including all prior rollovers), expected ticket sales for the next drawing, and current market interest rates.
Annuity Payout Option: Payment scheme wherein prizes are awarded starting with 1 immediate payment followed by 29 yearly payments. These payments are graduated – meaning they increase by 5% each year to account for inflation. The total value of all payments is equivalent to 100% of the advertised jackpot.
Lump Sum Option: Payment scheme wherein a one-time payment is immediately awarded to the winner. The total value is approximately 61% of the advertised jackpot. This is also known as the cash option and is the more popular choice among jackpot winners.
Federal Taxes: Income tax withheld by the US government, including income from lottery prize money. This can range from 24% to 37% of your winnings.
State Taxes: Additional tax withheld, dependent on the state. This varies across states and can range from 0% to more than 8%.
Tax Liability: The taxes you will have to pay in order to receive your prize. This is computed as federal taxes + state taxes. Please note that in some cases, you might have to pay additional taxes.
Gross Payout: The total prize awarded to a winner before federal and state taxes are applied.
Net Payout: The remaining prize is awarded to a winner after federal and state taxes are applied.
- New Jersey Lottery Results and Winnings
- Tennessee Lottery Results and Winnings
- Mississippi Lottery Results and Winnings
- Arizona Lottery Results and Winnings
