On November 7, 2022, a single lottery ticket sold at a small service station in Southern California matched all six Powerball numbers.
The jackpot attached to that ticket was almost impossible to comprehend:
$2.04 billion.
It was the largest Powerball jackpot ever won and, at the time, the largest lottery jackpot in U.S. history.
There weren't two winning tickets.
There weren't five people splitting the prize.
There was one jackpot-winning ticket.
Months later, California Lottery officials revealed the winner's name:
Edwin Castro.
On paper, Castro had suddenly become a $2.04 billion lottery winner.
But there was an important catch.
He was never handed a check for $2.04 billion.
In fact, the amount attached to his immediate cash option was less than half of the enormous figure displayed in headlines around the world.
Castro chose to receive his winnings as a lump sum.
That option was worth $997.6 million before federal taxes.
And because lottery winnings are taxable income at the federal level, his eventual spendable fortune would be smaller still.
Some widely circulated estimates have put the after-federal-tax figure at roughly $628 million, depending on assumptions about the applicable tax treatment.
But that figure should be understood as an estimate — not as an officially disclosed amount that Castro was confirmed to have deposited into his bank account.
Still, the contrast is extraordinary.
Advertised jackpot:
$2.04 billion.
Cash option before federal taxes:
$997.6 million.
Even before considering the winner's final tax situation, more than $1 billion had disappeared from the headline number.
How?
The answer reveals something many lottery players misunderstand about enormous American jackpots.
The Night Everything Changed
The record-breaking drawing took place on November 7, 2022.
The winning numbers were:
10, 33, 41, 47 and 56.
The Powerball was 10.
The jackpot had been growing for months.
Drawing after drawing had passed without anyone matching all six numbers.
The sequence stretched to 41 drawings before someone finally hit the jackpot.
That someone had purchased a ticket at Joe's Service Center in Altadena, an unincorporated community in Los Angeles County.
It was a small business suddenly connected to one of the largest financial windfalls ever produced by an American lottery.
California Lottery officials later identified the store's owner as Joe Chahayed.
The retailer received a $1 million bonus for selling the jackpot-winning ticket.
But the identity everyone wanted to know belonged to the person holding the ticket itself.
That person was Edwin Castro.
The Winner Is Revealed
California Lottery announced Castro's identity on February 14, 2023.
The timing made the announcement memorable: Valentine's Day.
But Castro himself did not appear at the news conference.
He wanted privacy.
California Lottery said he had respectfully declined the opportunity to appear publicly.
Instead, Castro provided a written statement.
He said he was shocked and ecstatic about winning, but he also pointed toward another beneficiary of the enormous jackpot: California's public education system.
Castro said he had benefited from being educated in California's public school system and was pleased that lottery activity connected to the jackpot had generated substantial funding for schools.
According to California Lottery, the jackpot sequence generated a record $156.3 million for California public education.
So while one ticket created an almost unimaginable private fortune, millions of dollars also flowed toward public schools through lottery proceeds.
Still, the question dominating public attention was obvious:
What happens when someone "wins $2.04 billion"?
The answer is more complicated than the headline suggests.
$2.04 Billion Doesn't Mean $2.04 Billion in Cash
This is one of the most misunderstood features of huge American lottery jackpots.
The advertised Powerball jackpot generally represents the value of the annuity option.
It does not mean that a winner can walk into the lottery office and immediately collect the full advertised amount in cash.
A jackpot winner typically faces two broad choices.
The first is the annuity.
Under the annuity structure, the prize is distributed through payments over roughly three decades rather than being handed over immediately.
The second is the lump-sum cash option.
Instead of receiving the advertised annuity value over many years, the winner takes a smaller amount immediately.
Castro chose the second option.
For the $2.04 billion jackpot, California Lottery reported that the lump-sum payment was $997.6 million.
That number is enormous.
But compare it with the advertised jackpot.
$2.04 billion versus $997.6 million.
The difference is approximately $1.0424 billion.
And that reduction happened before considering federal income taxes.
Why Is the Cash Option So Much Smaller?
At first glance, it can sound as though the lottery simply took away half the prize.
That's not really what is happening.
The $2.04 billion and the $997.6 million represented two different ways of valuing the prize.
The advertised jackpot represented the value of the long-term annuity payments.
The cash option represented the amount of money associated with funding the prize immediately.
This distinction becomes especially dramatic when interest rates and jackpot sizes are high.
The annuity is designed so that money invested over time can fund a stream of future payments.
Those future dollars are included when calculating the advertised jackpot.
If a winner instead demands the economic value immediately, there is no decades-long period for that money to generate the investment returns underlying the annuity calculation.
So the immediate cash value is lower.
This is why enormous lottery jackpots can produce such striking comparisons.
A person can truthfully be called the winner of a $2 billion jackpot while receiving less than $1 billion as the pre-tax cash option.
Both figures can be correct.
They simply describe different things.
Then Come the Taxes
After Castro selected the $997.6 million cash option, another major factor entered the equation:
Federal income tax.
Lottery winnings are generally treated as taxable gambling income for federal tax purposes.
That means a massive lottery winner doesn't simply receive the advertised cash value and keep every dollar.
There can be withholding when the prize is paid, and the ultimate federal tax liability is determined under the applicable tax rules when the winner files.
For an enormous prize like Castro's, the distinction between withholding and final tax liability is important.
The amount withheld at payout is not necessarily the same as the winner's eventual total federal income tax bill.
A jackpot approaching $1 billion pushes income far beyond ordinary tax brackets.
Consequently, estimates of Castro's final after-tax proceeds commonly assume that a very large portion of the $997.6 million would ultimately go toward federal income taxes.
One frequently repeated estimate places his net proceeds at around $628 million after federal taxes.
That is plausible as a simplified estimate based on the top federal income-tax rate applicable at the time.
But it should not be presented as though California Lottery published a statement saying, "Edwin Castro received exactly $628 million after taxes."
It did not.
His personal tax return is not public.
Deductions and other aspects of a taxpayer's individual circumstances can affect the final calculation.
So the responsible way to describe it is this: