The Powerball® jackpot has been raised to an estimated $825 million annuity, $410.2 million cash option, for tomorrow night’s drawing. That’s up from yesterday’s figures, but it’s still the 2nd largest jackpot in the 30-year history of the Powerball game and the 5th largest lottery prize ever offered in North America.
When the jackpot reaches this level, it becomes harder to predict the grand-prize estimate for the next drawing. Stronger sales drive the jackpot higher and can lead to the revisions of the prize estimate before the next drawing, as has occurred this past week.
Details About Cash vs. Annuity – And Taxes
There are misconceptions out there about cash vs. annuity and what that means. The cash option is NOT the annuity amount minus taxes. Here are the actual details involved:
If a jackpot winner were to choose the annuity option for tomorrow’s big prize (currently an estimated $825 million), they would receive 30 payments over 29 years adding up to the annuity total.
The cash on hand in the jackpot pool from the sale of tickets in the game is invested in securities, and the winner receives payments over time. The initial amount invested plus the interest generated over time by the investment adds up to the annuity amount of the jackpot. Withholdings are applied to each payment that the winner receives. If a winner were to pass away before receiving all their payments, the money would go into their estate. The lottery would make future payments as determined by the estate or the court.
If a jackpot winner were to choose the cash option for tomorrow prize (currently an estimated $410.2 million), they would receive the lump-sum amount in the jackpot pool from the sale of tickets in the game. There is no interest income involved in that scenario because the money isn’t invested. Another way of putting it is that the “rest of the money” does not exist in that instance. The winner receives the lump-sum amount in one payment, with withholdings applied to the entire amount.
Here in Iowa, 24 percent federal withholding applies to a jackpot prize along with 5 percent state withholding. Withholdings are automatically applied and can’t be modified or waived.
The withholdings are designed to cover the jackpot winner’s tax liability from claiming a large lottery prize. But the total taxes that the winner would owe depends upon their financial circumstances outside of winning the lottery.
In some instances, the withholding is not enough, in other instances, it’s too much. The details would be sorted out in the winner’s income-tax filing for the year. That’s one of the reasons the Iowa Lottery always encourages its winners to consult a lawyer or financial planner before they claim their prize.
Scammers Unfortunately Notice Big Jackpots, Too
Scam attempts have been at all-time highs in recent years, and while the criminals behind them run scams of all types, they turn their attention to lottery games when jackpots are high.
In the past week, the Iowa Lottery has heard from multiple Iowans who received suspicious text messages, emails, or social media contacts claiming that they were big lottery prize winners. Those contacted indeed had not won a prize – they had received a message from scammers attempting to con them.
When you win a Powerball prize, you notify the lottery that you are the winner, not the other way around. The Iowa Lottery has records about the winning ticket and where it was purchased, but the lottery does not know the winner’s identity until that person presents the ticket for payment.
The Iowa Lottery keeps security reminders as a permanent feature on its website to help consumers stay safe. You can find the lottery’s Player Security tips here.
Remember The Sales Cut-Off Time
The majority of tickets for a particular drawing are purchased on the day of the drawing. So, if you’re buying a Powerball ticket for tomorrow night s drawing, remember that there is a sales cut-off time involved. Here in Iowa, the sales cut-off is 8:59 p.m. on the night of the drawing.
If you buy a ticket after that, you’ll still have a valid play, it will just be for a future drawing and you won’t be in on that night’s big money.
The cut-off deadline is an automated procedure and can’t be pushed back.
Please Play Responsibly
And as always, the Iowa Lottery reminds everyone that it only takes one ticket to win. Please play responsibly.
Hi, Loreen. You are correct: If a group claims a jackpot prize, everyone in the group has to agree to one form of payment or the other: cash or annuity. There cannot be a mix.
Posted by: Mary Neubauer | October 31, 2022 at 09:11 AM
How would this apply if you have four people splitting a jackpot win and some want annuity and some lump sum? Does everyone have to agree to either a annuity or lump sum ?
Posted by: Loreen | October 29, 2022 at 03:13 PM