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There are two big winners for the $1.787 billion Powerball jackpot<\/a> \u2014 and one could face a bigger tax bill.<\/p>\n Winning tickets sold in Missouri and Texas<\/a> matched all six numbers from Saturday night’s drawing, and those individuals will split the second-largest lottery jackpot, according to Powerball.<\/p>\n Each ticket holder can pick between two pretax options: a lump sum of $410.3 million or an annuitized prize of $893.5 million. The annuity consists of one upfront payment, followed by 29 annual payments that increase by 5% each year.\u00a0 \u00a0<\/p>\n More from Personal Finance:<\/strong> “Virtually everybody who wins the lottery picks the lump sum distribution,” Andrew Stoltmann, a Chicago-based lawyer who has represented several lottery winners, previously told CNBC<\/a>. “And I think that’s a mistake.”<\/p>\n In some cases, the annuity is a better option because “the typical lottery winner doesn’t have the infrastructure in place to manage such a large sum so quickly,” he said.<\/p>\n But either way, the winners will face a hefty tax bill. Here is what they can expect.<\/p>\n<\/div>\n Both Powerball jackpot winners will face an automatic federal tax withholding. For prizes over $5,000, the IRS requires a mandatory 24% withholding.<\/p>\n If the winners choose the $410.3 million lump sum payment, the 24% federal withholding reduces their prize by roughly $98.5 million.<\/p>\n<\/div>\n The next Powerball jackpot winner will easily land in the 37% federal income tax bracket<\/a>, regardless of whether they choose the lump sum or yearly payments.<\/p>\n For 2025, the 37% rate applies to individuals with taxable income<\/a> exceeding $626,350 and married couples filing jointly with taxable income of $751,600 or more for 2025.<\/p>\n You calculate taxable income by subtracting the greater of the standard or itemized deductions from your adjusted gross income.<\/p>\n<\/div>\n But the 37% rate doesn’t apply to all of your taxable income. <\/p>\n For 2025, single filers pay $188,769.75 plus 37% of the amount over $626,350. Meanwhile, joint filers pay $202,154.50 plus 37% of the amount over $751,600.<\/p>\n The jackpot winners’ remaining tax bill after the 24% federal withholding depends on several factors, but could easily represent millions more.<\/p>\n President Donald Trump’s<\/a> “big beautiful bill”<\/a> raised the standard deduction, among other breaks, which could reduce taxable income for many filers in 2025.<\/p>\n<\/div>\n On top of federal taxes, the Missouri ticket holder could also owe millions in state income taxes.<\/p>\n In addition to the 24% federal withholding, the Missouri Lottery is required to withhold 4% for state income taxes<\/a> for prizes over $600. That could reduce winnings by about $16.4 million if the winner chooses the lump sum. But the bill could be higher since Missouri’s top income tax rate is 4.7% for 2025.<\/p>\n
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