Powerball jackpot grows to $650 million. Here’s the tax bill if there’s a winner

With no winner for the Powerball jackpot, the prize has jumped to an estimated $650 million ahead of Monday’s drawing. Of course, those winnings will be smaller once the IRS takes its share.

The jackpot jumped to $650 million from $615 million without a winning ticket Saturday. If you beat the odds, you can now pick between a lump sum of an estimated $328.3 million or an annuitized prize that pays out yearly and is worth $650 million.

Your chances of winning the grand prize are 1 in about 292 million.

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“One thing that’s unique about the lottery is that you can accept it over a 30-year period with annuity payments,” said certified financial planner John Chichester Jr., founder and CEO of Chichester Financial Group in Phoenix. “That offers a lot more flexibility in how you pay the taxes.”

Rather than a larger, upfront tax bill, you can take the annuity payment and invest the money in a tax-efficient manner, said Chichester, who is also a certified public accountant.

Before winners see a penny of the multimillion-dollar jackpot, there’s a mandatory 24% federal withholding that goes to the IRS. The withholding applies to winnings of more than $5,000.

If you choose the $328.3 million cash option, the 24% withholding automatically reduces your cut by about $78.8 million. However, many taxpayers wrongly assume they’re off the hook after that 24%, Chichester said.

“That 24% comes off the top, but you’re still responsible for the other 13% at some point,” he said.

Here’s why: Millions in lottery winnings will push you into the top