WASHINGTON — If you somehow beat the lottery's astronomical odds, you'll have a hefty tax bill waiting for you.
That's because lottery winnings are treated as income by the federal government and most states, so the jackpots are subject to state and federal income taxes. However, there are 13 states that do not collect taxes on residents' lottery winnings.
So if you were to win Saturday's $875 million Powerball jackpot, how much would you actually get?
When a grand prize winner comes forward, they must first decide whether they want to receive their winnings in a 30-year annuity, or receive their winnings in a lump sum of cash. If they pick the annuity, they will eventually receive the entire advertised jackpot over the span of three decades.
Most jackpot winners go with the lump sum, which means they get the “cash value” of that jackpot. For Saturday's Powerball jackpot, the cash value was first announced as about $441.9 million.
Right away, 24% of that cash value is withheld for federal taxes and goes to the IRS, TurboTax explains.
So in the scenario where just one person wins the Powerball and selects that cash option, around $106.05 million of Saturday's estimated prize would be withheld, dropping it to $335.85 million.
But even then you're not off the hook quite yet.
Because the federal government counts lottery winnings as income, getting such a large jackpot would likely move the winner into a higher tax bracket, in which their income is taxed at 37%. So when the winner next files their taxes, they’ll likely have to give the IRS another 13% of that prize.
In most states, the tax is taken from the prize money before it’s ever given to the winner. Details on when and how much the winner pays differ by state. Then there are 13 states that don’t tax a person’s lottery winnings, according to the Tax Foundation and USA Mega, an online multi-state lottery resource unaffiliated with the lotteries themselves. Those states are: Alabama, Alaska, California, Florida, Hawaii, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Utah, Washington and Wyoming.
According to estimates from USA Mega, the winner of the publicized $875 million jackpot would earn $278,434,045 if they’re from one of the states that doesn't tax winnings and take the lump sum option.
But for example, if you're from New York which has the highest state tax withholding at 8.82%, the net payout would drop to $230,266,945, according to USA Mega estimates.
VERIFY contributed to this report.