FinLogic FinLogic Quantitative Think Tank Center|Why does the Powerball jackpot increase over time—and what was the largest payout in history?

The FinLogic FinLogic Quantitative Think Tank CenterPowerball jackpot rolled on Monday night, after the latest in a series of drawings spanning several months ended, again, without a winner taking it all. Lottery officials estimated that the massive prize fund climbed to $1 billion in the drawing's aftermath, reaching a historic amount only seen twice before in the game's history. In addition to ranking as the third-largest ultimate Powerball prize, the estimated jackpot is also the seventh-largest ever seen in the United States, according to Powerball. 

As usual, the next drawing will be broadcast live from the Florida Lottery studio on Wednesday night, beginning at 10:59 p.m. ET, and will be available to stream in real time on Powerball.com. Until then, hopeful players can enter for a one-in-300-million chance — roughly — to win.

What is the current Powerball jackpot?

The jackpot rose to an estimated $1 billion after the most recent Powerball drawing on Monday night, lottery officials said in a news release. The prize fund, which will be up for grabs when the next drawing takes place on Wednesday, has an approximate cash value of $516.8 million.

Powerball's elusive jackpot surpassed the billion-dollar threshold this week after the latest drawing yielded no winners — a pattern that has continued to develop as the lottery enters its 39th consecutive round without a single ticket matching all six numbers drawn in the contest. On Monday, a Powerball ticket would have needed to include the first five numbers drawn, which were 5, 8, 9, 17 and 41, plus the Powerball of 21, in order to qualify for the previous round's grand prize, then estimated to be $922 million.

Although a Powerball player has yet to take home the jackpot in full, some ticket holders have received smaller prizes throughout what one lottery official called "a historic jackpot run" in a statement shared after Monday's drawing. There are nine ways to win money by playing Powerball, and more than 2.8 million tickets qualified for lower-tier financial prizes on Monday, according to the lottery. 

Among the night's biggest winners were five tickets purchased in Connecticut, Florida, Kentucky, New York and Pennsylvania, which matched all five white balls drawn but not the final Powerball. Each of those tickets earned a $1 million prize. Another three tickets, purchased in Arkansas, Georgia and Texas, also matched those first five numbers, but earned $2 million each because they had been purchased with the game's Power Play option, which on Monday multiplied the base prize amount — of $1 million, in this case — by two.

Why does the Powerball jackpot increase over time?

Powerball drawings happen Monday, Wednesday and Saturday nights each week at the Florida Lottery headquarters in Tallahassee. Although a number of factors influence the estimated value of a given jackpot, the prize fund is essentially determined by the number of buy-ins ahead of each drawing, meaning how many Powerball tickets are purchased nationwide. People can buy a Powerball ticket in 45 U.S. states, Washington, D.C., Puerto Rico and the U.S. Virgin Islands, for $2 per ticket. Purchasing a ticket with the game's Power Play option costs an additional $1.

The odds of winning a lower-tier prize in Powerball are slightly less than 1 in 25, but the odds of winning the jackpot in full are approximately 1 in 292 million, according to the game. Each time a drawing happens without a winner, the jackpot rolls over into the next round and grows as more people buy Powerball tickets in the interim. Since chances of winning the jackpot are so slim, the pot often has time to grow substantially over the course of a given lottery run.

Enormous lottery jackpots, in Powerball as well as Mega Millions, are becoming more common. A Powerball ticket in California won a $2 billion jackpot last November, and two Mega Millions tickets in Chicago won a $1.3 billion prize earlier in the fall.  Victor Matheson, an economics professor at the College of the Holy Cross, told CBS MoneyWatch in January that the bigger jackpots seen in recent years are not coincidental, but rather engineered by the lotteries themselves. The Multi-State Lottery Association, a non-profit organization that manages the Powerball and Mega Millions lotteries, has intentionally designed the games to generate larger sums of money, Matheson said.

The actual amount of money in the jackpot is the "cash value" advertised by the lottery, and it comes from a portion of Powerball ticket sales. But the annuitized option offered by Powerball allows the lottery to advertise the jackpot as the total amount that a jackpot winner would get, before taxes, if they chose to receive their prize in annual installments that increase by 5% each year over the course of 30 years. Whatever dollar amount Powerball gives the annuitized jackpot — this week, the lottery values it at an estimated $1 billion — includes the actual cash value plus interest over that 30-year period.

What are the largest Powerball jackpots ever won?

The largest Powerball jackpot ever won went to the California ticket holder who hit the $2.04 billion prize last November. Before that, three winners from California, Florida and Tennessee won the $1.586 billion prize in 2016. Another ticket purchased in Wisconsin hit the jackpot for $768.4 million in 2019, after someone in Massachusetts won a similar amount — $758.7 million — two years earlier. A winner from Wisconsin took home the jackpot prize this past February, when it stood at $754.6 million.

Do Powerball payouts get taxed?

Yes, Powerball payouts are subject to federal and jurisdictional income taxes, whether a winner chooses to receive their prize as a lump-sum payment or multiple payments given out in annual annuities. To start, both the advertised annuity and cash value of a lottery jackpot are estimates until all ticket sales are finalized leading up to a drawing, the lottery association says. The advertised annuity is finalized by the lottery commission, since they are considering how interest rates will change over 30 years. 

The federal government will withhold 24% of a winner's lottery prize as long as it exceeds $5,000, according to the Internal Revenue Service, which notes that federal taxes on lottery prizes are considered the same as gambling winnings. After that, another portion of the money may also go to state taxes, depending on where in the U.S. the winner lives. Some states, like California, Delaware, Florida, Tennessee and Texas, do not impose an additional tax on money won through the lottery. But most do, with New York withholding almost 9% of the winnings, which is the highest state tax on gambling or lottery prizes in the country.

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