Seven lottery grand prize winner Richard Lustig offers advice on how to play the lottery.
A Maryland resident was the lucky winner of Wednesday’s $ 731.1 million Powerball jackpot, the fourth largest in the game’s history.
The good news for the winner, who bought the ticket in Alleghany County, is that he faces a single-digit state tax rate.
The Maryland lottery would yield $ 49 million in state taxes on the full cash option – a rate of 8.95%.
The state would have 8.95% per annum in the annuity option.
The not-so-good news is that he or she still owes federal taxes, which will consume a much larger share of the premium.
$ 730M POWERBALL TICKET LOCATED
In the case of the lump sum, which is the most common choice, earnings would be valued at $ 546.8 million before tax.
In the cash option, the jackpot is subject to federal withholding, which is 24% immediately before the winner receives a penny.
This would reduce the value of the premium by approximately $ 131.2 million.
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The IRS would also likely tax earnings in the highest federal income bracket, which is 37% for people with an income in excess of $ 500,000. A winner would be left with the difference between the 37% tax rate and the 24% federal withholding tax when the winner submits their income tax return at the end of the year, which would result in the deduction of another $ 71 , 1 million.
This means that about $ 202.3 million would be deducted from federal taxes, $ 49 million from state taxes and the total premium would be worth approximately $ 295.5 million.