In Michigan, $1.5 Billion Powerball Pot Just $522 Million After Taxes
Winner will discover two 'partners' sharing the pot
If you win the Powerball in Michigan, don’t be surprised to discover some "partners" sharing the pot with you: state and federal tax collectors. Here’s how much they will scoop off the top in taxes, as calculated by Joe Henchman, vice president of legal and state projects at the Tax Foundation.
The winner will have 25 percent withheld automatically by law for federal taxes and the state withholding tax. In Michigan, the state income tax rate is 4.25 percent.
When the winner files their taxes next year, they would have to pay again — the difference between what was withheld and what they owe.
The current jackpot is $1.5 billion (and not split between multiple winners), with the lump-sum option paying out $930 million. So off the bat, the federal government will take $232 million through withholding, and Michigan will take $40 million.
The winner would get a check for $658 million, but come tax time next year, will owe another $136 million to Washington. That leaves $522 million in true take-home money after all the taxes are paid, or about 34.8 percent of the headline-grabbing $1.5 billion.
Also, Henchman notes that if anyone wants to share their lottery winnings with friends or family, anything over $14,000 in one year or $5.45 million over a lifetime is taxed at the gift tax rate of 40 percent.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.