Here’s how much money you actually take home if you win the $1 billion Powerball in Texas
The last time a Texas Lottery winner chose the annuity option was for the May 17, 2023 Lotto Texas drawing.
A player must choose at the time of purchase how they want to be paid if they win a jackpot or Grand Prize. The Texas Lottery advises players to seek financial guidance when weighing their options.
“The best thing to advise people to do on a lump sum or an annuity payment is get a hold of their CPA, their financial advisor, their attorney,” said Bedford attorney J.C. Bailey.
The jackpot for the next drawing scheduled for Wednesday, July 19, is $1 billion.
Lottery winnings: What’s the difference between a lump sum and annuity payments?
A Powerball or Mega Millions jackpot winner who selects the cash value option will receive the net present value of the Grand Prize. This amount will be less than the advertised jackpot which is based on 30 annual graduated payments. For those choosing the cash value option, the current Texas Powerball jackpot will mean a payout of $516.8 million.
A Powerball or Mega Millions jackpot winner who selects the annual payments for the Grand Prize will receive 30 annual graduated installments. Annual payments for Powerball and Mega Millions are not equal. Each payment will be greater than the previous year’s payment. That is how the current jackpot of $1 billion was calculated.
A Lotto Texas jackpot winner who selects the cash value option will receive a single payment of the present cash value of the jackpot prize, whereas a Lotto Texas jackpot winner who selects the annuity will receive 30 annual installments.
How much taxes are taken out of a lottery win?
If the winner is a U.S. resident, the Texas Lottery Commission is required to withhold 24% for federal taxes upfront. However, based on individual tax situations, more taxes may be required at year end. For lottery winners who are not citizens or residents of the United States, the Texas Lottery Commission is required to withhold 30% in federal taxes for prizes over $600.
“If you think you can make more money taking a lump sum and having your investors do that, invest it over the long term that’s great. If you trust yourself to take it all because there won’t be anymore,” Bailey says. “If you don’t trust yourself, you might take a lump sum, take it out over time. It’s usually a 30-year fixed payment, in which case you get it a little bit slower, but you get more of the initial promise to mount.”
The Texas Lottery lists the chosen jackpot option for all Texas Lottery jackpot and Grand Prize winners under the “past results” tab of the Powerball, Mega Millions and Lotto Texas webpages. “AP” is written for Annual Payments and “CVO” for Cash Value Option.
“Your tax situation, your personality, your financial acumen are all going to be important in determining which option to take whether to take, the lump sum or an annuitized payment,” Bailey said. “So seek wise counsel, understand that your circumstances and your wiring maybe unique to you before you make that determination.”
