Winning ticket for Powerball’s $1.08 billion jackpot sold in California — here’s how much the winner will owe in taxes

It's official: There's a winner for the $1.08 billion Powerball jackpot — and the taxman will take a hefty cut.

A single ticket sold in California matched all six numbers drawn Wednesday night, making it the third-largest prize in the game's history, according to the Multi-State Lottery Association. Last-minute ticket sales pushed the jackpot to $1.08 billion from $1 billion.

The winner can choose between a 30-year annuitized prize of $1.08 billion or a lump sum payment of $558.1 million. Both options are pretax estimates.

While both choices come with a sizeable tax bill, experts say the winner will need a plan for managing the windfall.

"The biggest thing is to do nothing," said certified financial planner and enrolled agent John Loyd, owner at The Wealth Planner in Fort Worth, Texas. "Let the emotions and overwhelming feelings subside before making any decision."

Before seeing a penny of the jackpot, the winner will pay a 24% mandatory upfront federal withholding that goes straight to the IRS.

If they choose the $558.1 million cash option, the 24% withholding automatically reduces the prize by about $134 million.

However, Loyd warns the 24% withholding won't cover the entire tax bill because the prize pushes the winner into the top federal income tax bracket, which is currently 37%.

California doesn't tax lottery winnings, so there's no state tax bill if the winner lives there. However, it could be significant if they bought the ticket in California but live elsewhere, with some top-income state tax brackets exceeding 10%. 

After the 24% federal withholding, the jackpot winner's tax bill depends on several factors but could easily represent millions more.

Powerball isn't the only chance to win big. The jackpot for Friday night's Mega Millions drawing now stands at an estimated $720 million. The chance of hitting the jackpot in that game is roughly 1 in 302 million.