U.S. taxes on winnings: at least $2.85 billion

Taxes are withheld at the source on any prize exceeding $600.
DES MOINES, Iowa (AP) -- The nation's biggest Powerball jackpot winner is the U.S. Treasury, according to figures compiled by the Iowa Lottery and the Multi-State Lottery Association, which operates the lottery game.
The federal government has netted at least $2.85 billion since the first jackpot was awarded in 1988.
"They do well, much to the chagrin of lotteries and their customers," said Iowa Lottery Commissioner Edward Stanek.
Before any of the 302 grand prize winners could cash in tickets, which have totaled more than $7.1 billion, the federal government took its $1.9 billion off the top, according to lottery data.
IRS tax rates
Internal Revenue Service spokesman Christopher Miller said the federal government taxes the winnings at either 25 percent, 28 percent or 30 percent, depending on the circumstances. Beyond that, lottery winnings are taxed as part of a taxpayer's adjusted gross income at a top rate of about 35 percent for earnings that exceed $319,100 annually. Those assessments add at least an additional half-billion dollars in federal tax liabilities for jackpot winners. Those winners are spread throughout the 29 lotteries that make up the multistate association, which launched Lotto America on Feb. 13, 1988, and replaced that game with Powerball on April 19, 1992.
The federal government also has collected $357 million in taxes withheld from winners of lower-tiered Powerball prizes totaling more than $1.3 billion, lottery officials said.
Taxes are withheld at the source on any prize exceeding $600.
Know what to expect
For most grand-prize winners, tax withholding generally passes with little protest, lottery officials said.
"I don't think it's that much of a consideration when you take into account the amount of money that is given to them in one fell swoop," said Iowa lottery spokeswoman Mary Neubauer. "They certainly are aware of the taxes because we at the lottery point it out to them and we also make them aware that this will affect the amount of income tax that they will have to pay at the end of the year."
Ironically, said Chuck Baumann, lottery spokesman in Oregon, it's usually the smaller-prize winners who take note of the taxes.
"It seems like with the multimillion-dollar prizes, they've done some homework before they come in, so they've got some idea," Baumann said. "It's those folks in the thousands of dollars who go, 'Whoa, I didn't realize all of that was coming out.'"
Iowa Powerball jackpot winner Ed Brown of Washington said the taxes are an economic reality of government-sanctioned gambling.
"I don't give it much thought even," said Brown, who split a $10.4 million jackpot with a Missouri winner in December 1992. He chose to take his winnings in 20 annual payments of $261,000, which amounted to $176,000 after taxes.
"I've always believed that the more you make, the more taxes you probably have to pay."