Powerball winner faces huge tax bill
Q: What sort of tax bill is the recent winner of the $2.04 billion Powerball jackpot likely to owe?
A: The lucky Powerball winner will be looking at hefty tax bills.
One of those tax bills will be from the federal government and, depending on where the Powerball winner lives, another could come from the state. The exact amount of tax also will depend on the payout option that the winner chooses.
The winner can receive the payout as an annuity, which would be paid in 30 graduated payments over 29 years, or they can receive the Powerball money in a lumpsum payment, which in this case is $997.6 million. Most lottery winners choose the lump sum.
As far as federal taxes go, the IRS withholds 24% of the winnings off the top.
With the $2.04 billion Powerball jackpot, if the winner opted for the lump sum, they would be subject to federal income tax at the top tax rate, which is 37%. The lottery winnings would be reported on the winner’s 2022 federal income tax return.
Some states don’t tax lottery winnings. Other states that do have tax rates for lottery winnings that generally range from about 3% to almost 11%. For example, California (where the winning ticket was purchased) is a state that doesn’t tax lottery winnings. So if the lucky ticket holder is a California resident, they would only be looking at a hefty federal tax bill.
Q: Can teachers deduct the amount they spend on school supplies on their tax return?
A: It’s a common question among educators. And no wonder. Studies show more than 90% of teachers pay for their own classroom supplies, with average spending ranging from $500 to $750 in 2021.
So, thankfully, yes, some teachers and other educators can write off classroom supplies on their federal tax returns.
And for the 2022 tax year, the maximum educator expense deduction has risen by $50 to $300. That means that if you’re an eligible educator, you can deduct up to $300 of out-of-pocket classroom expenses incurred in 2022 when you file your federal income tax return. And you don’t have to itemize to claim the deduction.
If you’re married and you file jointly with your spouse, and they are also an eligible educator, you can deduct up to $600 of eligible classroom expenses. But each of you can only claim up to $300.
To be able to write off up to $300 of your unreimbursed out-of-pocket classroom expenses, you need to be an “eligible educator.” For tax purposes, an eligible educator is anyone who is a teacher, instructor, counselor, principal or aide at a school for kindergarten through 12th grade. You also must work at least 900 hours during the school year to be able to claim the deduction.