CABOT, Ark. (KNWA/KFTA) — The headline jackpot rarely reflects what a lottery winner ultimately keeps.
For the Dec. 24 Powerball drawing, the advertised jackpot was about $1.817 billion, but the actual take-home amount depends on whether the winner – a yet-to-be identified Arkansas resident – chooses the lump-sum cash option or the 30-year annuity.
Lump sum option
Powerball organizers say most winners choose the lump-sum payment option, which for a prize of this size, is estimated at $835 million before taxes.
Federal taxes account for the largest reduction. Lottery winnings are subject to a mandatory 24 percent federal withholding, but for a prize this large, the winner’s final federal tax bill would approach the top marginal rate of 37% once the return is filed, reducing the lump sum by roughly $300 million…