Lump-sum payment. This means you get the entire jackpot money. However, there’s a trick. You get paid immediately, which lowers your sum to around 61% of the jackpot. The reason why the lottery does that is that they don’t keep your lump sum for investment (keep reading).
Annuity payments. You agree to get your money over the course of 30 years. During that time, the lottery invests the lump sum and earns from interest. You don’t have to worry about your money because multiple governments are a guarantee you will receive it.
What Are the Applicable Taxes When You Win the Powerball?
If you read our lottery payout and tax guide, you find three types of taxes applicable to your Powerball winnings. Here is a brief explanation of each!
The initial rate for the federal tax is 24%. This applies Kbc Whatsapp number to all residents, and you are obliged to report any taxable revenue. If you find yourself in a higher tax bracket, this tax can theoretically increase to 37%.
As for non-residents, the tax is 30% and doesn’t change. That means you can play US Powerball as a foreigner, but this tax will be higher.
State Taxes
First, it’s important to mention that some states don’t apply this tax to lottery winnings. If you are in California or Delaware, you won’t have to pay a dime. As for other states, this rate varies from 2.9% to 8.8%. It’s good to be a resident of North Dakota, which only taxes you 2.9% on lottery winnings. Most states have a rate of around 5%, but if you play in New York, state tax is 8.82%.
Local Taxes
The local taxes might also be applicable in your case. These are the fees required by the county or municipality where you reside or play. If you are a foreigner, the money you transfer to your country could also be subject to taxes. That’s why it’s smart to hire a tax expert to help you understand any applicable charges.
An Example of How Your Payout Works
It’s much simpler if you choose a lump sum payment. Let’s say that you won $1 million. Here is what happens:
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