Approximately $183 million will go straight to the IRS
Winners at Powerball Jackpot can expect large advance federal tax withholding. The IRS requires 24% withholding for prizes over $5,000.
If you choose the $826.4 million cash option, 24% federal tax withholding will reduce your prize money by $183 million.
But Windfall pushes you into a 37% tax bracket and your bill will likely be higher, John Chichester Jr., founder and CEO of Chichester Financial Group in Phoenix, told CNBC earlier.
How to calculate federal tax quotas
The next Powerball Jackpot winner will easily land on the 37% federal income tax bracket, whether you choose to pay lump sum or pay annually.
For 2025, the 37% tax rate applies to married couples who earn more than $626,350 for individuals with taxable incomes and earn more than $751,600 in 2025.
Calculate taxable income by subtracting most of the standard or itemized deductions from adjusted gross income.
However, the 37% tax rate does not apply to all taxable income. In 2025, the single filer will pay $188,769.75 plus 37% of the amount over $626,350. Meanwhile, the joint filer will pay $202,154.50 plus 37% of the amount over $751,600.
The remaining tax bills for jackpot winners after 24% federal withholding are dependent on several factors, but can easily represent millions. President Donald Trump’s “Big Beautiful Building” has raised a standard deduction in other breaks that could reduce taxable incomes for many filers in 2025.
You can also borrow state taxes depending on where you live and where you purchased your ticket. Some states do not have income tax or do not tax lottery prizes, but other states have a state tax range with a highest income of over 10%.
Powerball isn’t just a big chance to win. The jackpot for Friday night’s Mega Millions Drawing is currently at an estimated $336 million. There is about one in 290.4 million people who will hit a jackpot in that game.
