One unfortunate consequence of striking it rich in a lottery is being required to pay the taxman before you can collect your winnings. The more you win, the more you pay, as many lottery winners very quickly find out.
The winner of the third-largest jackpot in U.S. history learned that lesson the hard way.
A Single Lottery Ticket Worth $768.4 Million Was Sold in Wisconsin
A ticket was sold in Wisconsin that had all six numbers correct for a Powerball drawing worth $768.4 million dollars.
“Everyone who buys a ticket dreams of winning the huge jackpot, but nobody actually thinks they will win or has a plan in place if they do,” said Jason Kurland, a partner at the Rivkin Radler law firm in Uniondale, New York.
“When I receive that initial call from a winner, I can hear the anxiety in their voice,” said Kurland. “Many of them don’t even tell me their real name at first.”
Taxes Eat Up a Very Large Portion of the Lottery Win
If you ever win the lottery, know that the top marginal tax rate of 37 percent means the winner will owe quite a bit at tax time–and the state where they win will also take its own cut.
For a $768.4 million jackpot, that means the cash option for a prize that large will be $477 million (ouch!), and then it will be further reduced by 24 percent in tax withholding.
Not only that, but if the winner had no reduction to their taxable income, there goes another $62 million that will go directly to Uncle Sam.
And then come the state taxes. In Wisconsin, officials can withhold 7.65 percent, which amounts to $36.5 million.
Dan Routh, a certified financial planner at Exencial Wealth Advisors in Oklahoma City, has the following advice for any big winners:
“There’s a big responsibility that goes with having such a large sum of money. It would be important to surround yourself with a quality team that’s working in your best interest.”