According to the lottery, the Powerball jackpot reached an estimated $725 million ahead of Wednesday's drawing, making it the seventh-largest prize in the game's history.

But after taxes, such winnings are significantly reduced.

If you purchase the winning ticket, you can choose between a lump sum payment of around $366.2 million and an annuitized award that pays out annually and is worth $725 million.

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The ability to accept the jackpot over a 30-year period with annuity payments is one of its unique features, according to John Chichester Jr., a certified financial planner and the founder and CEO of Chichester Financial Group in Phoenix. That gives you a lot more freedom in how you pay taxes.

You can accept the annuity payment and invest the money in a tax-efficient way rather than paying a greater upfront tax charge, suggested Chichester, a certified public accountant.

There is a 1 in approximately 292 million chance of winning the Powerball jackpot.

Nearly $88 million is paid to the IRS.
There is a necessary 24% federal withholding that goes to the IRS before winners receive a penny of the multimillion dollar reward. A withholding is required for prizes over $5,000.

If you decide to pay in cash in the amount of $366.2 million, the automatic 24% withholding automatically lowers your cut by around $88 million. But many taxpayers mistakenly believe that they are exempt beyond that 24%, according to Chichester.

He added, "That 24% comes off the top, but at some point you're still responsible for the other 13%."

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This is why: If you win the lotto and make millions, you'll be subject to the highest federal income tax rate. For 2023, taxable income of $578,126 or more for solo filers and $693,751 or more for married couples filing jointly are subject to the 37% rate. The greater of the standard or itemized deductions is subtracted from your adjusted gross income to determine your taxable income.

Of fact, not all of your taxable income is subject to the 37% tax rate. Single filers will pay $174,238.25 in taxes in 2023, plus 37% of any income exceeding $578,125. The total debt for married couples filing jointly is $186,601, plus 37% of the amount over $693,750.

Several factors will affect the remaining tax burden, but it may easily total millions more.