- The Powerball jackpot soared to an estimated $1.8 billion on Friday ahead of Saturday’s drawing.
- It’s the second-highest grand prize in U.S. lottery history, behind the $2.04 billion jackpot won in November 2022.
- However, the big winner can expect a hefty tax bill that will cut significantly into their prize.
Roughly $198.3 million goes straight to the IRS
The Powerball jackpot winner can expect a large upfront federal tax withholding. The IRS requires a mandatory 24% withholding for prizes that exceed $5,000.
If you choose the $826.4 million cash option, the 24% federal tax withholding automatically reduces your winnings by $198.3 million.
But the windfall pushes you into the 37% tax bracket, and your bill will likely be higher, certified financial planner John Chichester Jr., founder and CEO of Chichester Financial Group in Phoenix previously told CNBC.
How to calculate your federal tax brackets
The next Powerball jackpot winner easily lands 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 above $626,350 and married couples filing jointly earning $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 winner’s 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.
You may also owe state taxes, depending on where you live and where you purchased the ticket. Some states have no income tax or don’t tax lottery winnings, but others have top-income state tax brackets exceeding 10%.
Powerball isn’t the only chance to win big. The jackpot for Friday night’s Mega Millions drawing now stands at an estimated $336 million. The chance of hitting the jackpot in that game is roughly 1 in 290.4 million.
