So if you haven’t heard, the US Powerball or Lotto reach unprecedented heights of $1.5bn this week. Yes, 1.5 BILLION DOLLARS.
Last night’s draw has so far produced three winners who will share the prize. They have the option of collecting a lump sum or 29 annual installments. The 1.5 billion figure is calculated as those who choose the annual payments. The cash jackpot is significantly less at $868 million.
Because large numbers hurt our heads, Market Watch have gone to the bother of calculating the sum of the 40% tax the federal government imposes on powerball winnings.
So on an $868 million cash payout, the federal income tax hit would be about $344 million. Federal income tax will automatically be withheld from your prize, but only at a 25% rate. So on an $868 million payout, you would still owe the federal government almost $127 million.
Failure to realize that you owe the government money after wining the powerball is the reason so many winners actually end up bankrupt some years later.
We’d be grand with a mill.
Now go forth and ring your American relatives.
lead image via CNN
