Lottery Annuity Calculator
Enter the advertised jackpot, the cash option and your tax rates to compare the 30-year annuity with the lump sum, after tax.
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Shown on the lottery site on draw day; often 45–55%.
37% is the top bracket; 24% is withheld at payout.
0% in states without lottery tax.
- First annuity payment (before tax)
- $1,505,144
- 30th annuity payment (before tax)
- $6,195,375
- Annuity total after tax
- $58,000,000
- Federal withholding on the lump sum (24%)
- $11,520,000
- Break-even investment return
- 4.56% a year
If you can earn more than 4.56% a year after tax, the lump sum invested beats the annuity payments; below that, the annuity pays more in today's money.
| Year | Before tax | After tax |
|---|---|---|
| 1 | $1,505,144 | $872,983 |
| 2 | $1,580,401 | $916,632 |
| 5 | $1,829,511 | $1,061,117 |
| 10 | $2,334,972 | $1,354,284 |
| 15 | $2,980,081 | $1,728,447 |
| 20 | $3,803,423 | $2,205,985 |
| 25 | $4,854,238 | $2,815,458 |
| 30 | $6,195,375 | $3,593,317 |
How this was calculated
- First annuity payment = 0.05 × 100,000,000 ÷ (1.05^30 − 1) = 1,505,144; each later payment is 5% larger, the 30th is 6,195,375.
- Annuity before tax = 100,000,000; after 42% tax = 58,000,000.
- Lump sum = 48% × 100,000,000 = 48,000,000; after tax = 27,840,000.
One flat tax rate is applied to every payment; real tax depends on all your income and on state rules. Educational estimate, not tax advice.
What the advertised jackpot really means
The big number on a Powerball or Mega Millions ticket is the annuity value: 30 annual payments, the first paid at once and each one 5% larger than the one before. This lottery annuity calculator spreads your jackpot over those payments. For a $100 million jackpot the first payment is $0.05 × $100,000,000 ÷ (1.05³⁰ − 1) = about $1.51 million and the 30th is about $6.20 million. Winners can instead take the cash option, a single smaller payment, often around half the headline number.
Lump sum after tax
Lottery winnings are federal taxable income. The IRS requires 24% federal withholding on winnings over $5,000, but the top bracket is 37%, so a big winner owes the difference at filing time. With a 48% cash option, a $100 million jackpot pays $48 million up front. After 37% federal and 5% state tax, $27.84 million is left. The annuity pays $58 million after the same 42% tax, but spread over 29 years. Enter your own cash percentage, which the lottery publishes on draw day, and your state rate.
Lump sum or annuity?
The break-even return answers it. In the example the lump sum invested at about 4.6% a year after tax would match the annuity payments; earn more and the lump sum comes out ahead, earn less and the annuity pays more in today's money. The annuity also protects against overspending and its payments grow every year, while the lump sum gives control, a chance to invest and an estate you can leave. The calculation puts the first payment at time zero and applies one flat tax rate to every payment, so treat it as a guide.
Things to check
State rules differ: some states do not tax lottery winnings, others take 10% or more. Prize rules, the number of payments and the growth rate can change, so read the official game rules. Talk to a tax professional before claiming a large prize. To see how a lump sum could grow, try the compound interest calculator, or turn it into income with the savings withdrawal calculator.
Frequently asked questions
How does a lottery annuity pay out?
Powerball and Mega Millions annuities pay 30 annual payments, the first at once and each 5% larger than the last. The payments add up to the advertised jackpot.
How much is the first annuity payment?
First payment = 0.05 × jackpot ÷ (1.05³⁰ − 1), about 1.5% of the jackpot. For $100 million that is roughly $1.51 million before tax.
How much tax is taken from lottery winnings?
The IRS withholds 24% federally on winnings over $5,000, but the top federal bracket is 37%, so large winners owe more at filing. Many states add their own tax.
Is the lump sum or the annuity better?
The lump sum wins if you can earn more than the break-even return after tax; the annuity wins if not, and it limits overspending. The calculator shows the break-even rate.
Why is the cash option smaller than the jackpot?
The advertised jackpot is the total of the 30 annuity payments. The cash option is the present value the lottery sets aside to fund them, often about half.