There's a new Powerball multimillionaire. Winner, IRS rejoice
Sunday, May 19, 2013
One Powerball ticket for last night's $590.5 million lottery jackpot was sold at a grocery story in Zephyrhills, Fla.
The winning numbers were 10, 13, 14, 22, 52 and the Powerball 11.
Yes, that's a little less than earlier estimates of the ultimate payout. But the final tally is still enough to make last night's jackpot the largest in Powerball history. The game's previous largest jackpot was $587.5 million won Nov. 28, 2012.
The lottery multimillionaire now must decide whether to take his or her new fortune in 30 year payouts or in one lump sum of almost $371 million.
If the winner followers the usual pattern, Powerball officials soon will be writing a big check for $370,896,780.54.
Taxes off the top, later: Of course, the winner will see a big chunk of change come out of that payout immediately thanks to the withholding that lottery officials must calculate and send to Uncle Sam.
That tax withholding rate is 25 percent.
So the $371 million is reduced by almost $93 million. If my handheld calculator is correct, the precise withholding amount is $92,724,192. That amount also is this week's By the Numbers figure.
The winner then must do the math again in April, adding in other taxable income and subtracting deductions, to compute the additional tax due the U.S. Treasury based on the winner's eventual tax bracket. Remember, the top tax rate now is 39.6 percent on taxable income of more than $400,000 for single filers.
A head-of-household taxpayer can make up to $425,000 before hitting that top tax rate. Married couples filing jointing don't owe taxes at the top rate until they make more than $450,000.
And don't forget, the 3.8 percent Medicare tax on investment earnings comes into play for folks with gross incomes of $200,000 or more or married couples filing jointly with combined gross incomes of $250,000 or more.
State taxes, too: The one bit of good tax news for the Powerball jackpot winner is that if the new multimillionaire is indeed a resident of Florida and not just a tourist who bought the ticket while vacationing, is that he or she won't have to worry about state taxes.
Florida doesn't have an income tax.
In case you're wondering, Alaska, Nevada, South Dakota, Texas, Washington and Wyoming join the Sunshine State in not collecting an income tax. New Hampshire and Tennessee don't tax wages, but do collect a tax on investment earnings.
More than one winner: While the Internal Revenue Service obviously is very happy about the Powerball payout (and the agency really needs something positive given the attention it got last week), Uncle Sam and other tax collectors have millions more reasons to smile.
Powerball's website reports that in addition to the one jackpot winner Saturday, another 7,598,546 lottery players won prizes totaling more than $84 million.
Two tickets are worth $1 million each to the owners in New York and South Carolina.
Those lucky lottery players join a lot of other smaller prize winners who live in states that do collect taxes on income that includes prize winnings.
Starting over: Now I'm not encouraging gambling. I know it's a costly compulsion for many folks and can wreck finances and lives.
But if like the hubby and me you just occasionally play the lottery and want to possibly join the fraternity of winners, the Powerball jackpot resets at $40 million for Wednesday's drawing.
Relative to May 18 payout, it's a pittance. But I wouldn't turn it down, even with the accompanying tax bill.
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