AB Rep: +289
|Posted: Tue Jan 12, 2016 4:09 am Post subject: Tallying the big tax bite of a $1.4 Billion Powerball win!
|Sorry, Powerball hopefuls, but there's no way you're walking away with the entire $1.4 billion.
It's not simply an issue of the odds — although the Multi-State Lottery Association puts the chance of winning the grand prize at one in 292.2 million. Or the implications of having to share Wednesday's record-high pot if there are multiple winners.
It's the taxes that'll get you.
Of course, the first hit comes even before taxes kick in. That estimated $1.4 billion prize is only if the winner opts to take the winnings in 30 payments over 29 years. If you want the money now in one lump sum, the jackpot is a mere $868 million, a cut of 38 percent.
Next up is the federal tax bill. Lottery winnings are taxed as ordinary income.
"If they win the jackpot, they're going to be subject to the highest federal tax rate of 39.6 percent," said Melissa Labant, director of tax advocacy for the American Institute of Certified Public Accountants. "It's a lot more significant than folks expect."