Lottery Payout: Lump Sum vs Annuity
Take the cash today or 30 growing payments? Enter the advertised jackpot and this calculator strips out federal and state tax, lays out every annuity payment, and discounts the whole stream back to today so you can see which option is genuinely worth more.
Jackpot details
Taxes
Annuity & your own return
How to use this calculator
1. Enter the advertised jackpot and the cash option
The number on the billboard is the annuity total, not a pile of money sitting in a vault. Lotteries publish the cash value alongside it; divide that cash value by the advertised figure and type the result as a percentage. Around 48% is typical, but it drifts with interest rates, so use the real pair of numbers for your drawing when you have them.
2. Choose a federal treatment, then add your state
Start with the top marginal rate, because a jackpot of any size lands there. Switch to withholding-only if you just want to see the cheque that arrives first. Then pick your state to load its top rate, or leave it on the manual option and type any rate — including zero.
3. Set the discount rate honestly
This is the return you would actually earn on the cash after tax and fees, not the number a brochure promises. Every dollar of optimism here pushes the verdict toward the lump sum, so if you are unsure, run it twice: once at a cautious rate and once at an aggressive one, and see whether the answer flips.
4. Read the break-even rate before you decide
The break-even figure is the return at which the two options are worth exactly the same today. If you are confident of beating it, the cash is mathematically better. If not, the annuity is — and it also removes the risk that you spend the whole prize in three years, which is the failure mode that actually ruins winners.
Lottery payout FAQs
Why is the lottery cash option so much smaller than the advertised jackpot?
The advertised jackpot is the sum of 30 growing annual payments, not money the lottery holds today. The cash option is what the prize pool is actually worth right now, before the lottery would have used it to buy the bond ladder that funds those payments. That is why the cash value usually lands somewhere near half of the headline number, and why it moves up and down with interest rates.
How much tax is withheld from lottery winnings?
Federal law requires 24% to be withheld up front from a large gambling prize. That is only a deposit. A jackpot pushes almost any winner into the top ordinary bracket, so the real federal bill is closer to the top marginal rate and the balance is due when the return is filed. This calculator shows both figures side by side so the withholding number is never mistaken for the final cost.
Do lottery annuity payments stay the same every year?
Not for the big multi-state games. Powerball and Mega Millions annuities are graduated: the first payment is the smallest and each later payment is about 5% larger than the one before it, so the final payment can be more than four times the first. Some state games and smaller prizes do pay a flat amount, so set the annual escalation to 0% if that matches your prize.
Does my state tax lottery prizes?
It depends where you live and where you bought the ticket. States with no income tax on wages generally take nothing, while high-rate states can claim a double-digit share. Pick your state to load its top rate, or choose the manual option and type any rate you want, including 0% for a no-tax state.
Which option actually leaves you with more money?
It comes down to the return you can realistically earn on the cash. Discount the after-tax annuity payments at your own expected rate and compare that present value against the after-tax cash option. A low discount rate favors the annuity, a high one favors the lump sum, and the crossover usually sits within a couple of percentage points of the annuity's own built-in growth rate.
Is this lottery payout calculator exact?
No, it is a planning estimate. Real jackpots differ by game and drawing, cash-option percentages move with interest rates, state rules vary, and your final bill depends on filing status, residency, other income, and deductions. Confirm any real prize with a tax professional before deciding.