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Topline
The Powerball jackpot jumped to an estimated $1.1 billion for a Labor Day drawing, this year’s largest lottery prize and Powerball’s fifth-largest ever, though a lucky winner—facing astronomical one-in-292.2 million odds—could take home significantly less of that amount after paying required taxes.
The prize is the largest lottery jackpot this year and Powerball’s fifth-largest ever.
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Key Facts
A ticket holder matching all five white balls and a red Powerball for the jackpot can choose between a payout over 30 annualized payments or a one-time lump sum cash payout of about $498.4 million.
The lump sum payout—typically the preferred selection—would be reduced to at least $378.7 million after a mandatory 24% federal tax withholding, while a federal marginal rate as high as 37%, depending on the winner’s taxable income and other tax deductions, could cut the winnings down to $313.9 million.
Annual installments would pay an average of $23.1 million with a 37% federal rate.
Lottery winnings are subject to additional taxes in some states, with rates as high as 10.9% in New York ($54.3 million) to as low as 2.5% in Arizona ($12.4 million), though states like Florida, California or Texas don’t tax winnings.
What To Watch For
The next Powerball drawing will be held Monday night. Mega Millions will hold its next drawing for a $302 million jackpot on Tuesday, with a cash option of $136 million. That prize would be reduced to $103.3 million after a 24% federal tax withholding or $85.6 million after a 37% federal marginal rate.
Surprising Fact
The jackpot is the fifth-largest in Powerball history. The fourth- ($1.3 billion) and seventh-largest ($842 million) were drawn in April and January of last year, respectively.
Key Background
Some of the largest U.S. lottery prizes ever won have been claimed over the last decade, after sweeping rule changes were announced in recent years by Mega Millions and Powerball to raise the ceiling for grand prize winnings. Mega Millions announced earlier this year that new rule changes, including improving the odds to win any prize from one-in-23 (from one-in-24) after removing one “Mega Ball” from the drawing pool would improve the odds of winning the jackpot from one-in-302.6 million to one-in-290.4 million. Powerball announced rule changes in 2015, which increased the pool of white ball numbers contestants could choose from, lowering the odds of the jackpot from one-in-175.2 million to one-in-292.2 million.
