Someone hit Powerball’s $699.8 million jackpot. Here’s the tax bill

There’s a Powerball winner in California who’s about to be ultra-wealthy — even after giving good ol’ Uncle Sam a cut of the windfall.

A single ticket sold in the Golden State matched all six numbers drawn Monday night to land the game’s $699.8 million jackpot. The top prize had been growing since early June when a ticket sold in Florida won $286 million.

The latest jackpot ranks as the seventh-largest prize in U.S. lottery history and the fifth biggest for Powerball.

Of course, the advertised amount is more than what the person will end up with. Winners get to choose between taking their prize as either a lump sum or an annuity paid over 30 years, and either way taxes eat up a good portion of the winnings.

For this $699.8 million Powerball prize, the cash option — which most people go with — is $496 million.

Before that reaches the winner, a 24% federal tax withholding of about $119 million will get shaved off the top. That would leave a hefty $377 million, although the IRS will likely be owed more at tax time due to the top marginal income tax rate of 37%.

There is good news on the tax front: California generally does not tax lottery winnings. That compares with, say, winning in New York City, where a state income tax rate of 10.9% would apply, as well as a local tax of 3.876%.

Despite the share that goes to taxes, the windfall is more than most people see in a lifetime. This makes it important to get professional guidance before heading to lottery headquarters, experts say. In California, you get one year to claim your prize. Also be aware that California does not allow winners to remain anonymous. 

Generally speaking, the first call should be to an attorney experienced in assisting lottery winners, experts say. Other professionals also should be brought in to help, including a tax advisor and a financial advisor.

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The winner also should make a copy of their ticket and store the original in a safe place (i.e., a lockbox or a bank safe deposit box). Additionally, it’s best to share the news with as few people as possible, experts say.

Powerball’s jackpot has reset to $20 million for Wednesday night’s drawing. Your chance of matching all six numbers with a single ticket is 1 in 292 million.

Meanwhile, Mega Millions’ top prize is $45 million for Tuesday night’s pull. Your chance of hitting that game’s jackpot is 1 in 302 million.

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