There's still hope in 2021 for aspiring multimillionaires.
The Powerball jackpot has grown to $441 million — the third largest jackpot this year — after no one won the top prize in Monday's drawing. The next drawing is Wednesday, December 29, at 11 p.m. ET and will be the final Powerball drawing of 2021.
The $441 million prize is for a winner who chooses the annuity option, paid over 29 years. Most winners take the cash option, which for Wednesday night's drawing is an estimated $317.5 million.
The last time the Powerball jackpot hit was the October 4, 2021, drawing when a single ticket in California won the $699.8 million prize. Since then, there have been 36 drawings in a row without a jackpot winner, according to Powerball.com.
For another chance at success, the Mega Millions jackpot is also nine figures with a prize of $201 million, or a $144.1 million cash option, according to MegaMillions.com. That drawing will take place Tuesday, December 28, at 11 p.m. ET.
Of course, either prize option would also be subject to taxes. And that could prove tricky for the more than 109 million Americans traveling this holiday season, according to AAA estimates.
If you're buying a lottery ticket while out of state, a big win could be more complicated and more expensive. Your winnings will "absolutely be subject to federal tax. Your state tax bill depends on where you live and where you buy your ticket," says Tim Gagnon, an associate professor of accounting at Northeastern University. He's also an attorney and a certified public accountant.
For example, an Ohio resident who bought a winning Powerball ticket while visiting New York for the holidays would have to claim the win in New York and file a tax return there. They'd ultimately pay 10.9% New York state tax on the jackpot, instead of the 4.797% rate Ohio assesses on lottery wins, per figures from lottery site USAMega.com. That difference takes another $19.3 million out of the cash prize winnings.
Here are the five states that have the highest tax rates on lottery winnings, and how much of a bite they would take from the cash prize in the $441 million Powerball jackpot, according to USAMega.com.
Top tax rate on lottery prizes: 8.95%
Estimated state tax bill: $28.4 million
Top tax rate on lottery prizes: 9.85%
Estimated state tax bill: $31.2 million
Top tax rate on lottery prizes: 9.9%
Estimated state tax bill: $31.4 million
Video by Stephen Parkhurst
Top tax rate on lottery prizes: 10.75%
Estimated state tax bill: $34.1 million
Top tax rate on lottery prizes: 10.9%
Estimated state tax bill: $34.6 million
If you play the lottery in a state that taxes lottery winnings, and you live in a state that does, too, the two will offset each other.
"Most of the states set it up so there will be a state tax because they're looking for the revenue, but there will be a credit in your own state for what you've paid to that state, up to the amount of your state's tax on that money," Gagnon says. For example: "If your state would have charged $10 and the other state charges $20, you get a credit for $10."
A few states, including Florida, California, New Hampshire, and South Dakota, don't tax lottery winnings, which could be a boon to travelers who purchase a ticket in one of those states. But you'll still have to report the income in your home state.
If you find yourself in the lucky situation where you hit it big, don't rush to claim or spend the money.
"Remember to breathe," Susan Bradley, a certified financial planner and founder of the Sudden Money Institute in Palm Beach Gardens, Florida, told Grow. Her firm has advised past lottery winners. "It's a pretty big deal to become a millionaire or billionaire overnight."
That pause also gives you time to strategize, including coming up with a financial plan and navigating the taxes. "Before you do anything else, contact a lawyer and an accountant," Gagnon says.
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