Illinois’ $1 Billion Powerball Jackpot: How Much Do You Keep?

Unless you live in Alabama, Alaska, Hawaii, Nevada, or Utah (no Powerball in those states), you've got a chance on Saturday night to not only take care of paying for this year's Christmas presents, but Christmas presents for every Christmas for the rest of your life.

The Powerball jackpot has now swelled to another huge potential payday of $1 billion after another drawing without a top-prize winner, making it one of the largest jackpots in US lottery history. With public interest surging and ticket sales climbing across Illinois and beyond, many players are dreaming about what they’d actually take home if they beat odds of roughly 1 in 292 million and matched all six numbers.

But before you start planning your island getaway or purchase of the island, let’s break down how much of that $1 billion you’d truly keep if you won, and which payout option makes the most sense.

Assuming That You Win The Powerball Jackpot, You'll Have To Decide On Lump-Sum Or Annuity

Let's first take a look at what happens if you choose the lump sum option.

You receive one one-time payout of the jackpot’s cash value, which is always significantly less than the advertised $1 billion. For the current $1 billion prize, that lump sum is estimated around $461 million before taxes.

If you're looking to go on an immediate spending spree after finding out you've won, the lump sum option gives you instant access to a huge pool of money, which would be great for immediate debt payoff, investments, or major purchases.

If you want the annuity option (30 years of payments), you should know that the full advertised jackpot reflects an annuity payout, meaning you’d get annual payments over 29 years, with each payment about 5 percent larger than the last. Not a big pile initially, but it will certainly grow year after year.

Here's What Happens With The Taxes On Your Lottery Win In Illinois

Whether you take the lump sum cash or the annuity option, taxes will take a big bite out of your winnings. For federal taxes, lottery winnings are taxed as ordinary income. That means even with 24% withheld initially, your final federal tax bill could reach 37% due to your high income level.

Then comes the Illinois state tax of 4.95 percent on lottery winnings.

Putting it all together, your take home scenario should look like this:

• Gross cash lump sum: $461 million

• Federal tax (37%): $170 million

• Illinois tax (4.95%): $23 million

• Estimated take-home: $268 million

Your final number will vary based on your exact situation, deductions, and how tax law evolves, but it illustrates that you typically keep far less than headline jackpot figures that caused you to buy the Powerball tickets in the first place.