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BAM | Bill, Alex & Mike: Lottery Ticket Lawsuit
Bill Anderson, Alex Holley, and Mike Greenidge talk the latest hot topics in the news.
The Powerball jackpot for Wednesday night's drawing sits at an estimated $716 million. However, the actual amount deposited into the winner's bank account will be significantly lower once the IRS and state tax agencies take their cuts.
Cash vs. annuity
By the numbers:
Before taxes even apply, the winner must choose how to receive the money. The $716 million figure is the annuity option, paid out as 30 annual payments averaging $23,866,667.
Most winners, however, choose the lump-sum cash option. For Wednesday’s drawing, the cash value is $307,200,000.
Federal taxes
Dig deeper:
Lottery winnings are taxed as ordinary income, and a jackpot of this size immediately pushes the winner into the highest federal tax bracket. The federal tax system handles this in two stages:
- Mandatory withholding: The IRS requires lottery commissions to automatically withhold 24% on prizes over $5,000. On the cash option, this instantly removes $73,728,000.
- Final tax bill: The top federal tax rate for 2026 is 37%. Come tax season, the winner will owe the remaining 13% difference, which equates to an additional $39,891,957.
After the total federal tax obligation, the cash prize drops to a subtotal of $193,580,043.
State taxes
Local perspective:
The final payout depends heavily on where the winning ticket was purchased, with state taxes on lottery prizes ranging from 0% to 10.9%.
- Best places to win: Nine states have no personal income tax, and California explicitly exempts lottery winnings from state taxes. Winners in states like Florida, Texas, or California will take home the maximum net cash payout of $193,580,043.
- Worst places to win: High-tax states take a massive secondary payout. New York levies the highest state tax on lottery prizes at 10.9%. Winners in Maryland face a 9.5% rate, dropping the final cash take-home down to $164,396,043.
Canadian couple wins big lottery prize 8 years after 7-figure jackpot win
A couple in Canada has claimed a six-figure lottery win for the second time, lottery officials say.
What's next:
The winning numbers for the $716-million Powerball jackpot will be drawn at 10:59 p.m. Wednesday.
If a single ticket matches, the winner should expect to take home between $164.3 million and $193.5 million in cash. Otherwise, that number will grow for Saturday's drawing.
The Source: Information from this article was sourced from the Pennsylvania Lottery, the IRS, Jackson Hewitt Tax, Catalina Structured Funding and Chesapeake Financial Planning.