24-year-old Wisconsin Powerball winner may lose nearly half to tax
One lucky 24-year-old in Wisconsin matched all six Powerball numbers in March to win $768.4 million.
Manuel Franco came forward to claim the prize, the third-largest in history, on Tuesday.
During a press conference, Franco said he “just had that lucky feeling” when he bought the ticket on his way home from work.
“I looked at [the winning ticket] one number at a time,” Franco told reporters. “I was going insane pretty much … it was amazing, my heart started racing, blood pumping, my blood felt warm. I screamed for about five or ten minutes.”
Franco added that he wants to be responsible with his winnings.
Franco opted for the lump sum and the IRS is coming for a chunk of the change.
The lump sum is valued at about $477 million. About $114.5 million will be immediately withheld in federal taxes, bringing the amount down to around $362.5 million.
The IRS will also likely tax the winnings at the highest federal income bracket, which now sits at 37 percent for individuals with incomes in excess of $500,000. The winner may owe any difference between that tax rate of 37 percent and the federal withholding rate of 24 percent when he files his tax return at the end of the year – or 13 percent. That would shave off another $62 million.
In Wisconsin, the state is expected to take a tax bite equal to 7.65 percent or the top tax rate, deducting another $36.5 million.
That brings the overall tax tab up to about $213 million. From the lump sum value of $477 million, this would mean the take home pay is around $264 million.
Winnings are not subject to the 3.8 percent net investment income tax.
If Franco plans on giving money away, under current law he is allowed to give up to $15,000 to as many people as desired without tax consequences.
Akhavan advised any lottery winners to retain an attorney to help with asset protection.
“I frequently advise my clients on the use of sophisticated trusts and other techniques to ensure maximum protection,” he said. “A financial adviser should be selected to help prudently invest these assets. We hear all too often about lotto winners whose funds are mismanaged and they end up squandering their fortune.”
After Franco won, the Powerball drawing reset to $40 million.