The Powerball lottery drawing on November 5, 2022 produced a single jackpot winning ticket worth an advertised $1.9 billion. This is the largest lottery jackpot in U.S. history, surpassing the previous record of $1.586 billion set by a Powerball drawing in 2016. With a jackpot of this magnitude, many lottery players are curious what the actual cash payout will be for the lucky winner who holds the only winning ticket.
Powerball Jackpot Basics
When the Powerball jackpot is advertised at a certain amount, such as $1.9 billion, that refers to the annuity option for payment. With the annuity option, the winner receives an initial partial payment followed by 29 annual graduated payments over the next 29 years. Each payment is 5% larger than the previous one.
However, most big jackpot winners opt for the cash option instead of the annuity payments. The cash value is a one-time, lump-sum payment that is equal to all the advertised jackpot amount. The cash value is determined ahead of the drawing based on market interest rates and other factors.
For this $1.9 billion Powerball jackpot, the cash value is estimated at $929.1 million. However, the final cash value won’t be determined until after the drawing occurs and ticket sales are tabulated. It’s likely the cash value will end up being a few percentage points higher than the estimate.
Federal Tax Withholding
Before the winner even sees a dime, federal taxes are withheld from the lump-sum payment. The mandatory federal tax withholding rate is 24% for U.S. citizens. For non-resident aliens, the tax withholding rate is 30%.
So right off the top, about $223 million in federal taxes will be subtracted if the winner is a U.S. citizen. A non-resident alien could see around $279 million withheld for taxes.
State Income Taxes
In addition to federal tax withholding, state income tax is taken out of the cash payout if the winner resides in one of the 11 jurisdictions that tax lottery winnings:
| State | Top Tax Rate on Lottery Winnings |
|---|---|
| California | 13.3% |
| Delaware | 6.6% |
| Georgia | 6% |
| Illinois | 4.95% |
| Maryland | 8.95% |
| Massachusetts | 5% |
| New Jersey | 10.75% |
| New York | 8.82% |
| Ohio | 4% |
| Pennsylvania | 3.07% |
| Rhode Island | 5.99% |
For example, if the winner resides in California, over $123 million could be withheld for state income taxes on a $929.1 million jackpot. The other 39 states and Washington D.C. do not tax lottery winnings, so residents there avoid state taxes.
After-Tax Cash Payout Estimate
Factoring in the 24% federal tax withholding and estimated top state tax rate, here is an approximate breakdown of the after-tax cash payout for the $1.9 billion Powerball jackpot for winners in the top tax states:
| State | After Tax Cash Payout |
|---|---|
| California | $583 million |
| Delaware | $869 million |
| Georgia | $872 million |
| Illinois | $883 million |
| Maryland | $840 million |
| Massachusetts | $880 million |
| New Jersey | $825 million |
| New York | $842 million |
| Ohio | $891 million |
| Pennsylvania | $898 million |
| Rhode Island | $874 million |
For winners in the other 39 states without state income tax on lottery winnings, the estimated after-tax cash payout is around $706 million.
So while the advertised Powerball jackpot is $1.9 billion, the winner will end up with far less than that amount after federal and possible state taxes are deducted. But even after taxes, the cash payout will be worth hundreds of millions, transforming the lucky ticket holder into an instant multimillionaire.
Annual Payments Option
As an alternative to the lump-sum cash payout, the Powerball jackpot winner has the choice to receive their prize as an annuity. This spreads the full $1.9 billion amount over 30 graduated payments over 29 years.
The annual gross payments start at about $19 million in the first year and then grow by 5% each year until reaching about $76.7 million in the 30th and final payment. After taking out taxes on the income each year, the winner would clear about $14 million in the first annual payment.
However, most lottery winners opt for the cash, preferring immediate access to money over staggered annual payments. With proper financial planning and investing, winners can make the lump-sum last a lifetime while retaining flexibility and control over the funds.
But the annuity does offer the advantage of spreading the tax burden over three decades instead of entirely in one year. This results in more money over time compared to a lump-sum if it is not managed and invested carefully.
Claiming the Record $1.9 Billion Prize
In order to collect the jackpot, the winner has to take some important steps:
- Sign the back of the winning ticket.
- Keep the ticket very safe and secure.
- Consult experienced legal and financial advisors.
- Contact the state lottery commission to start the claims process.
- Select either the cash or annuity prize.
- Attend a press conference and have photo taken when claim is made.
- Wait for payment to be processed.
Most lottery winners work closely with legal, financial, accounting, and public relations teams to maintain anonymity and prudently handle their sudden wealth. Winners should be prepared to have their lives changed forever with this kind of instant fortune.
Historical Powerball Jackpots
While the November 2022 $1.9 billion Powerball jackpot smashed all records, the lottery has produced other top prizes over the years:
| Rank | Jackpot | Date | Winners | Payout |
|---|---|---|---|---|
| 1 | $1.9 billion* | Nov 5, 2022 | 1 | $929.1 million (est) |
| 2 | $1.586 billion | Jan 13, 2016 | 3 | $327.8 million (cash value split) |
| 3 | $768.4 million | Mar 27, 2019 | 1 | $477 million |
| 4 | $758.7 million | Aug 23, 2017 | 1 | $336.8 million |
| 5 | $731.1 million | Jan 20, 2021 | 1 | $546.8 million |
| 6 | $699.8 million | Oct 4, 2021 | 1 | $496 million |
| 7 | $687.8 million | Oct 27, 2018 | 2 | $354.3 million (split) |
| 8 | $632.6 million | Jan 5, 2022 | 2 | $316.3 million (split) |
| 9 | $590.5 million | May 18, 2013 | 1 | $370.9 million |
| 10 | $587.5 million | Nov 28, 2012 | 2 | $192.5 million (split) |
*Estimated jackpot amount before Nov. 5, 2022 drawing.
The previous record jackpot of $1.586 billion was split between three winning tickets on January 13, 2016. Each lucky ticket holder collected about $328 million after taxes from the cash value split.
Taxes Make a Big Dent
As demonstrated by the top 10 Powerball jackpots, the winner’s net payout after taxes is always far less than the advertised jackpot amount. Both federal and state taxes take a sizable bite out of these multimillion dollar lottery prizes.
For example, the single California winner of the record $1.9 billion Powerball prize will lose over $346 million to federal and state taxes. That drops the net payout from nearly $1.9 billion to around $583 million. Still an amazing fortune but not close to the advertised jackpot total.
Odds of Winning Powerball
The odds of winning the Powerball jackpot are incredibly slim at just 1 in 292,201,338. Here are the odds for other prize levels:
| Prize Level | Odds of Winning |
|---|---|
| Match 5 + Powerball Jackpot | 1 in 292,201,338 |
| Match 5 (no Powerball) | 1 in 11,688,053.52 |
| Match 4 + Powerball | 1 in 913,129.18 |
| Match 4 (no Powerball) | 1 in 36,525.17 |
| Match 3 + Powerball | 1 in 14,494.11 |
| Match 3 (no Powerball) | 1 in 579.76 |
| Match 2 + Powerball | 1 in 701.33 |
| Match 1 + Powerball | 1 in 91.98 |
| Match Powerball | 1 in 38.32 |
It takes incredible luck to beat odds of 1 in 292 million and match all 5 white balls plus the red Powerball. Most players will never achieve such astronomical odds. But someone eventually does get lucky, as evidenced by the historic $1.9 billion jackpot winner.
Buying a Ticket
To play Powerball, a ticket costs $2 per play. Players first pick five numbers between 1 and 69 for the white balls. Then they choose one number from 1 to 26 for the red Powerball.
There are 9 ways to win a prize, from matching just the Powerball up to matching all 5 white balls plus the Powerball to win the jackpot.
Tickets can be purchased at over 45,000 retail locations across 45 participating states, Washington D.C., Puerto Rico, and the U.S. Virgin Islands. Drawings are held every Monday, Wednesday, and Saturday at 10:59 p.m. ET.
Some key rules:
- Players must be 18 or older to buy tickets. Age differs in some jurisdictions.
- Tickets must be purchased before the cutoff time, usually within 1 to 2 hours before the drawing.
- Power Play can be added for $1 extra per play to multiply non-jackpot prizes.
- Tickets are bearer instruments. Signing them is optional.
Over 50% of jackpots have been hit when the advertised amount is greater than $400 million. So interest and ticket purchases surge when the top prize grows that large.
Changes Coming in 2022
Starting in August 2022, Powerball added a Monday night drawing. Now, drawings are held three times a week instead of two times.
And even bigger changes are slated for early 2023. The starting jackpot will increase to $20 million and maximum rollovers will be allowed up to $25 million between drawings. This is expected to produce bigger and faster-growing jackpots.
Also in 2023, three more numbers will be added to the main field for a new 5/69 format. This will increase the overall odds of winning any prize to 1 in 24.9. But it will be tougher to win the jackpot at 1 in 292 million odds.
These changes are designed to continue interest in Powerball and create more record jackpots in the future.
Should You Play Powerball?
Playing the lottery is entertainment for most people, similar to going to a movie or sporting event. A $2 ticket for the chance, however remote, to instantly become a millionaire is an exciting proposition. And proceeds do benefit public causes like education.
However, players should keep perspective and play responsibly within a limited entertainment budget. The lifetime odds of even winning a secondary $1 million prize are still an extremely unlikely 1 in 11.7 million. And with multiple weekly drawings, playing can quickly add up over time.
Of course, someone eventually does hit these improbable jackpots, changing their life forever. For instance, the lucky winner in South Carolina beat the epic 1 in 292.2 million odds to take home this record $1.9 billion Powerball prize. But players always need to play within their means and weigh the low chances of life-changing winnings versus the costs.
Conclusion
The November 2022 Powerball drawing made lottery history with an advertised jackpot of $1.9 billion. After federal taxes and possible state taxes, the cash payout will end up being around $700 million up to $800+ million depending on the winner’s residence. Taxes will take a big chunk out of the winnings. But the lucky ticket holder will still become mega-rich overnight with an after-tax cash prize that instantly turns them into a multimillionaire. Powerball jackpots this enormous generate huge public interest. But players need to manage expectations and play responsibly given the very low odds, even if someone eventually does hit the slim 1 in 292 million chance to win it all.
