With the latest Powerball and Mega Millions jackpots adding up to about $800 million, someone in America may soon be collecting an enormous windfall. And thanks to changes in tax law signed by President Trump late last year, that person’s winnings could be even sweeter.
The Tax Cut and Jobs Act will slash tax bills for most high earners in 2018. The policy was designed to help business owners who want to invest and hire workers, but lower rates also apply to lottery winners, whose prize money the IRS treats like income.
While advertised as $440 million, the next Powerball winner will be awarded $278 million if they opt to take the lump sum, according to the Web site USA Mega. A winner who chooses the 30-year annuity will receive about $14.7 million.
Either way, the winner will end up in the top 37% income tax bracket for 2018, which kicks in at $500,000 for singles (and $600,000 for couples).
For the lump sum, the result will be a tax bill of roughly $103 million. Still, if the winner had claimed that prize in 2017 under the old tax rules, they would have faced an even higher 39.6% rate. The difference equates to savings of more than $7 million.