$1.787 billion Powerball jackpot winning tickets sold in two states — one could pay a bigger tax bill One of them could pay a higher tax bill
$1.787 billion Powerball jackpot winning tickets sold in two states
There are two big winners for the $1.787 billion Powerball jackpot — and one could face a bigger tax bill.
Winning tickets sold in Missouri and Texas matched all six numbers from Saturday night's drawing, and those individuals will split the second-largest lottery jackpot, according to Powerball.
Each ticket holder can pick between two pretax options: a lump sum of $410.3 million or an annuitized prize of $893.5 million. The annuity consists of one upfront payment, followed by 29 annual payments that increase by 5% each year.
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"Virtually everybody who wins the lottery picks the lump sum distribution," Andrew Stoltmann, a Chicago-based lawyer who has represented several lottery winners, previously told CNBC. "And I think that's a mistake."
In some cases, the annuity is a better option because "the typical lottery winner doesn't have the infrastructure in place to manage such a large sum so quickly," he said.
But either way, the winners will face a hefty tax bill. Here is what they can expect.
Roughly $98.5 million withheld for the IRS
Both Powerball jackpot winners will face an automatic federal tax withholding. For prizes over $5,000, the IRS requires a mandatory 24% withholding.
If the winners choose the $410.3 million lump sum payment, the 24% federal withholding reduces their prize by roughly $98.5 million.
How the federal tax brackets work
The next Powerball jackpot winner will easily land in the 37% federal income tax bracket, regardless of whether they choose the lump sum or yearly payments.
For 2025, the 37% rate applies to individuals with taxable income exceeding $626,350 and married couples filing jointly with taxable income of $751,600 or more for 2025.
You calculate taxable income by subtracting the greater of the standard or itemized deductions from your adjusted gross income.
But the 37% rate doesn't apply to all of your taxable income.
For 2025, single filers pay $188,769.75 plus 37% of the amount over $626,350. Meanwhile, joint filers pay $202,154.50 plus 37% of the amount over $751,600.
The jackpot winners' remaining tax bill after the 24% federal withholding depends on several factors, but could easily represent millions more.
President Donald Trump's "big beautiful bill" raised the standard deduction, among other breaks, which could reduce taxable income for many filers in 2025.
Missouri winner could owe millions in state taxes
On top of federal taxes, the Missouri ticket holder could also owe millions in state income taxes.
In addition to the 24% federal withholding, the Missouri Lottery is required to withhold 4% for state income taxes for prizes over $600. That could reduce winnings by about $16.4 million if the winner chooses the lump sum. But the bill could be higher since Missouri's top income tax rate is 4.7% for 2025.
Meanwhile, Texas does not tax lottery winnings, which means that ticket holder could pay millions less.
Powerball isn't the only chance to win big. The jackpot for Tuesday night's Mega Millions drawing now stands at an estimated $358 million. The chance of hitting the jackpot in that game is roughly 1 in 290.4 million.
This story originally appeared on: CNBC - Author:Kate Dore, CFP®, EA
