IE 11 is not supported. For an optimal experience visit our site on another browser.

If You Win Wednesday Night's Powerball, the Tax Bill Will Leave You in Tears

If you win Wednesday night's Powerball, the tax bill will leave you in tears
Justin Sullivan | Getty Images
/ Source:

If you're lucky enough to win the estimated $375 million Powerball, there's one thing you need to do right away: pause.

Even before you claim your winnings after the 10:59 p.m. ET Wednesday drawing, it's smart to assemble a team of experts.

The experts should include a lawyer, an accountant and a financial planner, said certified financial planner Joshua Mungavin, a principal and wealth manager at Evensky & Katz / Foldes Financial in Coral Gables, Florida. They can help you make decisions like whether to establish a blind trust or other entity to claim your winnings anonymously, and offer advice on taking the payout as a lump sum or annuity.

"There needs to be some consideration of what letting the world know you won the lottery will mean for your life," he said.

Put the money in a savings account or certificate of deposit, and leave it there for at least a few months, said certified financial planner Hans-Christian Winkler, an independent advisor with ClaraPhi Advisory Network in New York.

"Emotions range up, down, sideways, and when you're emotional, excited, you tend to make the wrong decisions," he said. "Let it sink in."

That pause gives you an opportunity to think through all your aims for that money, and prioritize those goals and purchases. Taxes — and oh boy, will there be taxes — can also take a big bite out of your windfall, and it's smart to plan for that bill from the outset.

Lottery site estimates the federal tax withholding on the $235.4 million lump sum would be $58.85 million, and state taxes could knock out up to another $20.76 million (with New York the worst offender). Those figures are just the amounts withheld up front; your final tax burden is likely to be even higher.