Introduction Winning the Powerball jackpot is a dream, but many people don’t realize that taxes take away a huge portion of the prize. Before planning how to spend your winnings, it’s important to understand how lottery taxes work. Federal Taxes In the United States, the IRS automatically withholds 24% of your winnings for federal taxes. However, the top federal tax rate is 37%. This means many winners will owe more taxes when they file their returns. State Taxes In addition to federal taxes, many states also take a cut of lottery winnings. The rate depends on where you live. For example: New York: Over 10% California: No state lottery tax Texas and Florida: No state lottery tax Lump Sum vs. Annuity Winners can choose between a lump sum payment (one-time cash) or an annuity (yearly payments over 29 years). The lump sum is smaller but paid right away, while the annuity spreads out the tax burden. Conclusion Taxes can turn a billion-dollar jackpot into hundreds of...
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