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Richard Lustig, seven-time grand prize winner, offers tips for playing the lottery.
A Maryland resident was the lucky winner of Wednesday’s $ 731.1 million Powerball jackpot, the fourth-largest in gaming history.
The good news for the winner, who bought the ticket in Alleghany County, is that he or she faces a single-digit state tax rate.
The Maryland Lottery is said to bring in $ 49 million in state taxes on the lump sum cash option – a rate of 8.95%.
The state would take 8.95% each year on the annuity option.
The bad news is that he or she still owes federal taxes, which will take a much larger share of the price.
$ 730M WINNING POWERBALL TICKET LOCATED
In the case of the lump sum, which is the most common choice, the winnings would be valued at $ 546.8 million before taxes.
Under the cash option, the jackpot is subject to federal withholding, which is immediate 24% before the winner receives a penny.
This would reduce the prize amount by approximately $ 131.2 million.
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The IRS would also likely tax earnings on the highest federal income bracket, which is 37% for people with incomes over $ 500,000. A winner would have to make any difference between that 37% tax rate and the 24% federal withholding rate when the winner files income tax returns at the end of the year, which would deduct approximately $ 71.1 million. additional.
This means that approximately $ 202.3 million would be deducted in federal taxes, $ 49 million in state taxes, and the lump sum jackpot valued at approximately $ 295.5 million.
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