Powerball is a multi-state lottery game played in the United States, which regularly offers jackpots worth hundreds of millions of dollars.
Just on Tuesday it set a new record for the largest lottery jackpot of all time when it reached more than $2 billion.
Powerballis played in 45 states, as well as Washington D.C., the U.S. Virgin Islands and Puerto Rico.
What about taxes?
It is important for players not to forget, that beyond the dazzling amounts they may win, they will have taxes withheld.
According to the sweepstakes, the withholding rate depends on how much you win and the jurisdiction in which you purchase your ticket.
A federal tax is levied on all prize winners over $5,000, while many of the participating states levy their own tax on top of this.
Also, some places, such as New York City, impose a local tax on lottery winnings.
You can find out how much tax you might have to pay below, although as it is such a complex issue, you should consult a financial expert if you win a large amount so that you are fully aware of your tax obligations.
Federal Taxes
Lottery winnings are treated as income in the United States, so your final tax bill depends on how much money you win in total in a year, not just the amount you win in the lottery.
Federal tax rules are consistent in the U.S and you do not have to pay tax on any winnings up to $600, but you must report your winnings to the Internal Revenue Service (IRS) if you win an amount between $600.01 and $5,000.
You will be issued a W-2G form to complete with your tax returns.
A 24 percent federal tax will be assessed on all prizes over $5,000 (including the jackpot) before you receive the prize money.
You may then be eligible for a refund or have to pay more tax when you file your returns, depending on your total income.
If you win the jackpot, you will be subject to the maximum federal tax rate of 37 percent.
Players who are not U.S. citizens are subject to an initial federal tax payment of 30 percent instead of 24 percent.
State Taxes
In addition to federal taxes, your Powerball winnings may also be subject to state taxes.
It is important to remember that the tax applied to your prize will vary not only by state but also by your individual circumstances.
States that are taxed the most
New York (8.82%), Maryland (8.75%), Washington (8.5%), Oregon (8%) and Wisconsin (7.65%) are the states where you will receive the least money due to taxes.
States that do not charge taxes
Those states where your earnings will be tax-free include California, Florida, New Hampshire, Puerto Rico, South Dakota, Tennessee, Texas, Virgin Islands and Wyoming.
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