Tax News How Will You Be Taxed If You Win the Powerball Jackpot? Read the Article Open Share Drawer Share this:Click to share on Facebook (Opens in new window)Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Pinterest (Opens in new window)Click to print (Opens in new window) Written by TurboTaxBlogTeam Published Jan 13, 2016 - [Updated Aug 23, 2019] 3 min read Have you caught Powerball fever? Much of the country has, creating long lines at convenience stores and driving today’s jackpot to a record-breaking $1.5 billion dollars as of publishing. Admittedly, your chances of correctly choosing all six numbers are slim – one in 292 million – but today’s big drawing is a prime opportunity to think about the tax implications of winning money, big or small. Your Lucky Day All lottery winnings are subject to Federal and (sometimes) state income taxes, and sizeable jackpots are taxed at the maximum federal rate of 39.6%. That means if you were to take your winnings all at once instead of over 30 years, an $930 million cash payout like today’s will equal roughly $368 million owed in Federal taxes. Income tax will automatically be withheld from any lottery prize, but only at a 25 – 28% rate – so winners need to put aside an additional lump sum to pay their Federal tax bill, which will be based on their actual tax rate. Believe it or not, many lottery winners don’t do this and have to pay the consequences of a much higher tax bill later on. If the Powerball winner lives in a state with a personal income tax, he or she will also owe taxes to the state. In most states, the tax rates on high-income individuals range from 5% to 10% – so that means between $47 million and $93 million additionally should be held for state taxes for this particular jackpot. Some cities have local income taxes to consider, as well. The Facts About Gambling Winnings The odds are you won’t need to worry about paying taxes on more than a billion dollars. (If only!) But, the odds are good that you’ll someday win a smaller jackpot, a sports bet or a stack of cash at the blackjack table. Casinos and other gaming organizations will send you a Form W-2G if you: Win $1,200 or more on a slot machine or from bingo Win$1,500 or more on a keno jackpot of Win more than $5,000 in a poker tournament Win $600 or more on all other games, but only if the payout is at least 300 times your wager Not all gambling winnings are subject to W-2G reporting. When you file with TurboTax, we’ll ask simple questions about your gambling winnings and losses. Then we’ll do the math and fill in the appropriate tax forms based on your entries. Just plug in some numbers from your W-2G and we’ll do the rest. If you had an unlucky year, know that gambling losses are tax deductible, but only to the extent of your winnings. While gambling winnings are treated like ordinary income, losses are itemized deductions. This requires you to report all the money you win as taxable income on your tax return. However, the tax deduction for your losses is only available if you itemize your deductions. If you claim the standard deduction, then you can’t reduce your tax by your gambling losses. For example, if you won $10,000 in 2015 and lost $20,000, you can only claim $10,000 in losses (up to the amount of winning) in your itemized deductions. If you ever have any questions about gambling wins and losses, you can ask TurboTax along the way while you file. And even if you never gamble, your biggest paycheck of the year is waiting for you now: your tax return! Get started for free today. Previous Post Supreme Court Rules Marriage Equality in All States Further Simplifying… Next Post Tax Form Arrival: What Other Tax Forms You Should Expect… Written by TurboTaxBlogTeam More from TurboTaxBlogTeam Leave a ReplyCancel reply Browse Related Articles Crypto Understanding Crypto and Capital Gains Work 7 Things You Need to Know About the New Business Report… Work Using Form 8829 to Write-Off Business Use of Your Home Tax Tips Roth 403(b) vs. Roth IRA: Which Should You Invest In? Life Interest Rates, Inflation, and Your Taxes Investments Essential Tax Tips for Maximizing Investment Gains Uncategorized TurboTax is Partnering with Saweetie to Elevate Hoop Dr… Business Small Business Owners: Optimize Your Taxes with a Mid-Y… Small Business The Benefits of Employing Your Children and the Tax Bre… Income and Investments Are Olympics Winnings Taxed?