Powerball jackpot soars to $615 million. Here’s how much the winner could owe in taxes

Before winners see a penny of the multimillion-dollar jackpot, there’s a mandatory 24% federal withholding that goes to the IRS. The reserving applies to winnings of more than $5,000.

If you choose the $310.6 million cash option, the 24% withholding automatically minimizes your cut by over $74.5 million. However, many taxpayers wrongly assume they’re off the hook after that 24%, Chichester estimated.

“That 24% comes off the top, but you’re still responsible for the other 13% at some point,” he said.

Here’s why: Millions in raffle winnings will push you into the top federal income tax bracket. For 2023, the 37% rate applies to taxable revenues of $578,126 or more for single filers and $693,751 or higher for married couples filing together. (You calculate taxable proceeds by subtracting the greater of the standard or itemized deductions from your adjusted gross income.)  

Of course, the 37% doesn’t fasten to all of your taxable income. For 2023, single filers will pay $174,238.25 plus 37% of the amount over $578,125. As for linked couples filing together, the total owed is $186,601.50 plus 37% of the amount above $693,750.

The remaining tax bill depends on discrete factors, but could easily represent millions more.

You may also owe state taxes, depending on where you live and where you pay off the ticket. While some states have no income tax or don’t tax lottery winnings, others have top income state tax ranks exceeding 10%.