The Powerball jackpot for Wednesday’s drawing has reached $930 million, marking the seventh-largest prize in the game’s history. The advertised amount applies to a single-winning ticket that selects the 30-year annuity option. Most winners, however, opt for the lump-sum cash prize, which in this case would be $429 million before taxes.
Federal taxes take a significant bite out of lottery winnings. The IRS automatically withholds 24% on prizes over $5,000, reducing a $429 million cash prize to roughly $326 million upfront. Filing 2025 federal tax returns could require an additional 13%, since the jackpot pushes winners into the top 37% tax bracket, leaving a total after federal taxes of about $283.6 million. State taxes vary widely, from 2.9% in North Dakota to 10.9% in New York. Some states, including California, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming, do not tax lottery winnings. For residents of other states or those who bought tickets out of state, tax obligations can become more complicated, though credits are often available for taxes paid to other jurisdictions.
Lottery pools also carry potential tax complications. The IRS may assume a single person claiming a group prize is gifting portions to other members, which could trigger gift taxes for amounts above $13.99 million ($27.98 million for married couples in 2025) at a rate of 40%. Experts advise pool members to document shares in writing to avoid issues with the IRS. Winners are strongly encouraged to consult with tax professionals, financial advisors, and estate planning attorneys immediately. Those who choose the 30-year annuity option may have more flexibility in managing tax liabilities over time.