Powerball jackpot hits $1 billion — but only if you pick the less-popular prize option. If you win, here’s the tax bill

The jackpot for Powerball’s Monday night drawing is a whopping $1 billion.

Sort of, anyway.

The advertised number represents the pretax amount you’d get if you were to receive your windfall as an annuity spread over three decades. Yet most jackpot winners choose the upfront one-time cash payment — which, for this drawing, is less than half the annuitized amount and also is a pretax figure: $497.3 million.

The annuity option is higher than it has been, relative to the cash option, due to higher interest rates that make it possible for the game to fund larger annuitized prizes, according to the Multi-State Lottery Association, which runs Powerball. The cash option, however, is driven by ticket sales.

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So what would you pay in taxes if you were to beat the odds and land the jackpot?

Assuming you were like most winners and chose the cash option, a 24% federal tax withholding would reduce the $497.3 million by $119.4 million.

Yet more would likely be due to the IRS at tax time. The top federal income tax rate is 37% and this year applies to income above $539,900 for individual tax filers and $647,850 for married couples. Next year, the top rate is imposed on income above $578,125 (individuals) and $693,750 (married couples).

This means that unless you were able to reduce your taxable income by, say, making charitable donations, another 13% — or about $64.7 million — would be due to the IRS. That would translate into $184.1 million going to federal coffers in all, leaving you with $313.2 million.

State taxes could also be due, depending on where the ticket was purchased and where you live. While some jurisdictions have no income tax — or do not tax lottery winnings — others impose a top tax rate of more than 10%.

Nevertheless, the winner would end up with more money than most people see in a lifetime or two. 

And, of course, you probably won’t need to worry about how much the jackpot really would deliver — the chance of a single ticket matching all six numbers drawn in Powerball is about 1 in 292 million.

Meanwhile, Mega Millions’ jackpot is $87 million ($42.8 million cash) for Tuesday night’s drawing. The chance of your ticket hitting the jackpot in that game is roughly 1 in 302 million.