Historic $1.08billion lotto winner will lose $124m if they pick popular option
The historic $1billion Powerball jackpot winner will automatically lose $124million - if they pick a lump sum payment.
The lucky California winner, who has not been officially named, matched with the winning numbers on Wednesday and became an instant billionaire overnight.
However, if they decide to take all of the money at once, their jackpot winnings will be cut significantly due to taxes, according to a financial expert.
Winners are given the option of cashing in the lump sum or taking the cash instalments over a number of years.
But if the Powerball winner opts for the whole amount, they will receive $516.8 million and automatically pay a whopping 24 percent in taxes.
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Financial planner John Chichester Jr, founder and CEO of Chichester Financial Group in Phoenix, said the jackpot winner should work with a tax professional and financial advisor immediately before deciding to cash in.
He told CNBC: "It’s all about protection and paying the least amount of taxes possible, so working with professionals is very important."
John Chichester has warned of taking the jackpot winnings upfront (videoreputationusa/Youtube)The expert added winners who choose the 30-year instalments may have "a lot more flexibility for tax planning rather than cashing the jackpot.
He said if the winner chooses the $465.1 million cash option, the 24% withholding automatically reduces your prize by nearly $111.6 million.
“That’s exactly what happens with the lottery,” he said. “The 24% [withholding] is not the only tax bill", Mr Chichester added.
Although the winning ticket was purchased in Los Angeles, it doesn't necessarily mean the player is from California and they could be hit by state lotto tax rates, which range from 2.9 percent in North Dakota to a huge 8.82 per cent in New York.
Store manager Navor Herrera at Las Palmitas Mini Market sold the ticket - he will also receive a $1million prize (AP)However, some states do not tax lottery winnings, such as Tennessee, Florida and California. States such as Ohio impose a four per cent tax on winnings.
It comes after a woman, who has not been identified, was seen breaking down in tears and hyperventilating at Las Palmitas Mini Market, the Los Angeles store where the Powerball ticket was purchased.
She was seen wearing a black cap with a denim jacket and bright green leggings and could be heard by neighbours across the street after screaming so loudly, according to reporters at the shop.
During the video, the ecstatic woman collapses on her knees at the doorway of the Mini Market, waving her arms in jubilation.
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She says to the customers "'I'm scared right now, I'm so scared", while adding "God bless you" to those around her.
The mystery woman broke down in tears as she said she was the winner of the $1billion Powerball prize (KTLA 5)If she is the true winner, the mystery woman is now a billionaire after claiming the third-biggest Powerball prize ever.
One journalist asks "are you the winner?" when she emotionally responds "yes" before running down the street while being chased by paparazzi and television journalists.
California Lottery officials had confirmed Las Palmitas Mini Market sold the winning ticket and its owner, Nabor Herrera, will receive a whopping $1million bonus from Powerball.
Mr Herrera, who has owned the store for the last seven years, admitted he has no idea who bought the ticket, due to selling so many tickets in recent days.
According to the shopkeeper, he plans to use the $1million bonus to expand his business and take his family on a "one week" holiday to Cabo San Lucas in Mexico.
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