The chance of winning Powerball is about 1 in 292 million; for Mega Millions, it's 1 in 302 million.<\/li>\n<\/ul>\nWhen it comes to the lottery, it's been a good year so far for Uncle Sam.<\/p>\n
Winners of Powerball and Mega Millions jackpots \u2014 worth an advertised $2.9 billion in all \u2014 have collectively paid roughly $515 million to the IRS in 2021 taxes. And that won't be the end of it.<\/p>\n
Whether jackpot winners go with the immediate, reduced cash option (most do) or an annuity stretched across three decades, 24% is withheld for federal taxes. Yet because the top rate of 37% is applied to income above $523,600 (single tax filers) and $628,300 (married couples filing jointly), more ends up being owed.<\/p>\n
So far in 2021, there have been five Powerball jackpot winners \u2014 and the pace of those wins could pick up, because a third weekly drawing will be added on Mondays starting Aug. 23.<\/p>\n
Mega Millions, meanwhile, has had four winners this year (its $55 million jackpot won on June 8 remains unclaimed, however). For all collected prizes, winners have chosen the cash option instead of the annuity.<\/p>\n
For the three claimed Mega Millions jackpots \u2014 which have ranged from $96 million to $1 billion \u2014 winners' cash options were worth a combined $1.2 billion. The 24% federal tax withholding has totaled $288 million, reducing the collective take to $912 million.<\/p>\n
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Powerball winners' cash options have totaled $945.7 million, with jackpot amounts ranging from $23.2 million to $731.1 million. After the 24% federal withholding of $227 million, winners were left with $718.7 million.<\/p>\n
For illustration purposes: If winners were unable to reduce their taxable income at all, another 13% \u2014 the difference between the 24% withheld and the top tax rate of 37% \u2014 would be due to Uncle Sam. Collectively, that would be another $278.9 million or so going to federal coffers ($793.9 million altogether).<\/p>\n
Of course, those lottery wins generally contribute just a drip in the federal tax bucket. Income taxes paid by individuals are expected to comprise about $1.9 trillion (50%) of the government's estimated $3.8 trillion in revenue for fiscal year 2021.<\/p>\n
Local coffers also benefit from big lottery wins, as well. Depending on where the ticket was purchased, state taxes ranging from zero to more than 8% also would be applied.<\/p>\n
Like the federal withholding rate on jackpot wins, the amount withheld for state taxes might also be less than what you'll owe.<\/p>\n
There are ways to reduce how much of your winnings get taxed, although not many. For 2021, due to a temporary change in federal rules, the charitably inclined can lower their taxable income by making a qualified cash donation worth up to 100% of their adjusted gross income (that limit is scheduled to revert back to 60% in 2022).<\/p>\n
Some lottery winners set up their own charitable foundation or similar option, such as a donor-advised fund, and donate a portion of their windfall to it.<\/p>\n
The Mega Millions jackpot is $179 million ($129.5 million cash option) for Tuesday night's drawing. Powerball's jackpot is $211 million (cash option of $153.9 million), with the next drawing set for Wednesday night.<\/p>\n
Your chance of winning Powerball is about 1 in 292 million. For Mega Millions, it's 1 in 302 million.<\/p>\n
Source: Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"
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