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The Other Winner of That Big Powerball Prize? The I.R.S. — Dollars and Sense


On Wednesday, the Powerball lottery reached a record $587.5 million. So far two winning tickets have been announced, one in Arizona and one in Missouri. But there’s at least one more guaranteed winner: the Internal Revenue Service.

Lottery winners can take their prize in the form of a lump sum or an annuity paid over the next 29 years. The two winners would receive $192.5 million each if they elected to go with the lump sum. Since the IRS treats lottery winnings as regular income, it would be taxed at the top rate of 35 percent, meaning Uncle Sam would shave off about $65 million from each of them.

State taxes in Arizona and Missouri also take a chunk, dropping the winners’ final take to about $114 million in Arizona and $117.5 million in Missouri. Obviously, that’s still a ton of dough, but it’s good to keep in mind that when you hear “$587.5 million winner”, the final amount that goes into the winners’ pockets is much smaller.

And this just counts what the government takes. Best of luck dealing with all your about-to-be-discovered long-lost relatives.


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