161 Stillwater Drive in Aspen, CO, offers appeal to some luxury buyers. (Realtor.com)
The Powerball jackpot shot up to $1.5 billion Thursday, after no winner was crowned on Wednesday, Dec. 17. This is the fifth-largest jackpot in Powerball history, the seventh-largest in all lottery history, and the second-biggest Powerball grand prize this year: a $1.787 billion jackpot was hit Sept. 6 in Missouri and Texas.
If anyone is lucky enough to win the drawing on Saturday, Dec. 20, they’ll probably want to splurge on the home of their dreams (as well they should).
But should you truly be once-in-a-lifetime lucky enough to win, the reality is, you might not be able to afford as much house as you think—especially after taxes are taken out!
The actual take-home lottery winnings after taxes
The jackpot of $1.5 billion is a lot of dough. If someone wins, they have two options for collecting their winnings: the $1.5 billion prize spread over 30 annual installments or a lump-sum cash payout of about $679.8 million, which is usually preferred.
Let’s say the cash payout is chosen. In this case, the prize would drop to roughly $516.7 million after the mandatory 24% federal tax withholding. Depending on the winner’s taxable income, their federal tax rate could rise as high as 37%, reducing the payout further to about $428.3 million.
If the winner opts for installments, they could expect annual payments of roughly $50 million before taxes, or about $31.5 million per year if taxed at the 37% rate. And if they live in a state like New York, which taxes lottery winnings at 10.9%, they could owe even more.
The smart way to buy a house with the winnings
Using lotto winnings to buy a mansion in the wrong state could cost millions in property taxes alone.
“In New Jersey, Illinois, or Connecticut, a $20 million property may incur $400,000-plus annually in property taxes—forever. There is no cap, and assessments can spike,” says Chad D. Cummings, attorney and CPA at Cummings & Cummings Law in Naples, FL.
Fortunately, places like Florida and Texas offer dramatically lower effective rates and permanent homestead protections from creditors, ensuring the winner’s home won’t be taken in times of financial crisis.
If someone wins on Dec. 20, they should be strategic about where and how they buy their dream house.
“Buy in the wrong place, and you will bleed out in taxes and legal exposure. Worse, you may never be able to shield that home from litigation. One accident, one claim, and it is all gone. This is why domiciling in a state with strong homestead protections is essential,” explains Cummings.
Also, while it might be tempting to buy a waterfront mansion, doing so can do more harm than good. Here’s why: Coastal glamour comes with catastrophic insurance risks and disappearing carriers.
“If you buy a $50 million waterfront home in Miami or Malibu, good luck finding full coverage. Premiums now exceed $150,000 per year in high-risk zones, and many insurers will not even write policies over $10 million without self-insurance layers,” says Cummings.
At the end of the day, climate stability is wealth preservation. Cummings recommends places with greater climate stability like Idaho, Utah, and Vermont. They’re more affordable to insure due to their lower risk of wildfires, hurricanes, and flooding.
In addition, the potential winner should understand that owning homes in multiple states can trigger surprise audits and income tax liability in unexpected jurisdictions.
“Stay too long in your New York home and you may prompt statutory residency, causing the state to claim all your investment income, even if you thought you lived in Florida,” notes Cummings.
Opting for a single flagship residence simplifies managing and reduces exposure to complex tax scenarios from multiple property ownership.
“Buying several homes around the country may appeal for lifestyle diversity, but it introduces greater admin and tax complexity especially since capital gains exclusions typically apply only to your primary home,” says Alexander Kalla, a real estate agent at Keller Williams Bay Area Estates in San Francisco.
For a winner seeking to maximize both legacy and luxury, focusing on one primary property in a prestigious enclave often makes strategic sense.
161 Stillwater Drive in Aspen, CO, offers appeal to some luxury buyers. (Realtor.com)
This McLean, VA, mansion could be the perfect place for a lottery winner to lay down roots. (Realtor.com)
Going with the most expensive mansion can cost you in the long run
As you can see, using your lottery prize to buy the fanciest, most expensive home on the market without much thought can take a serious toll on your finances.
With the Virginia mansion, you’ll pay less in property taxes, insurance, and upkeep while still enjoying 5.3 acres of lush landscaping and 21,837 square feet of space. You’ll actually be able to live in it long term while preserving more of your wealth.
Whatever you do, retain a CPA and tax attorney to help you establish primary residency.
“Second, hire an estate planning attorney to deploy dynasty trusts or charitable structures now. Delay means death taxes later—possibly $100 million lost unnecessarily,” says Cummings.
Third, build a risk-management team: umbrella insurance, digital security, legal defense retainers, and press management. Jackpot winners become instant targets, and risk management can give you optimal peace of mind.
“Lastly, delay the actual purchase of your home if possible. Lease first. Use that time to stabilize residency, finalize title strategy, and avoid the irreversible consequences of buying under emotional pressure,” advises Cummings.
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