Tennessee Powerball ticket buyer wins $421 million
Will still owe state tax on associated investment earnings for a few more years
Sunday, November 27, 2016
Do you live in Lafayette, Tennessee? Or maybe you know someone who lives in this town of about 5,000 just 60 miles or so northeast of Nashville. Or perhaps you know someone who just happened to pass through there and purchased a Powerball lottery ticket.
Don't get too excited if you had 32 and 16 on your Powerball ticket. This Giphy image is from an earlier drawing,
not the almost $421 million jackpot won by a Tennessee ticket buyer this weekend.
That lucky person bought THE Powerball lottery ticket, which last night (Saturday, Nov. 26) matched all six of the national game of chance's numbers.
Congratulations! You or your new best friend is $420.9 million richer.
Payout preferences and taxes: Actually, you or your new best friend probably will be around $255 million richer. That's an estimated lump sum payout, which is what most lottery jackpot winners opt for instead of the 30 annual payments of the larger lottery amount.
The official lump sum projection was $243.8 million, a calculation based on a lower $403 million prize. The final Powerball amount increased as more and more lottery tickets were sold as the drawing neared.
Whichever winnings distribution method this and any other big prize winners choose, they also will owe federal and possibly state taxes.
Tennessee tax phase-out: The Tennessee ticket buyer is lucky here, too, since the Volunteer State doesn't have an income tax.
It does have a flat 5 percent tax on interest and dividend earnings, which the new multimillionaire should rack up by investing some of his or her Powerball money.
But there's good news there, too.
Tennessee's investment earnings tax, known as the Hall Income Tax after the state senator who sponsored the original legislation back in 1929, is being phased out.
Tennessee lawmakers cut the interest and dividends tax from 6 percent to 5 percent, beginning with this 2016 tax year. The tax rate is set to drop one percentage point a year as long as the state meets certain revenue targets.
When 2021 arrives, if all goes as planned, Tennessee's tax on interest and dividends will be no more.
And that year, Tennessee will become the eighth state without any income tax at all.
I think the new Powerball winner can probably deal with six years of paying tax on some investment earnings.
Other no-income-tax states: In case you want to see how close you came to winning -- and I know some of you, like me, bought a ticket -- the Powerball winning numbers were 17-19-21-37-44 and red Powerball 16.
Those six lucky ping pong ball numbers also win this week's By the Numbers honors since they mean added tax revenue for Uncle Sam and, for a while, Tennessee.
If you didn't get all of them, don't toss your ticket yet. You could be one of the more than 1.8 million lottery hopefuls that Powerball says won prizes totaling more than $17 million in this latest drawing.
As long as were talking numbers, here are the seven states that Tennessee will join in 2022 in not collecting any income tax at all: Alaska, Florida, Nevada, South Dakota, Washington, Wyoming and my home state of Texas.
When that happens, that will leave New Hampshire alone with a tax only on dividends and interest, but not on wage or salary income.
And coincidentally, back in July a $40 million Powerball winner was a Granite State resident.
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