Lottery Payout Calculator: Lump Sum vs Annuity After Taxes
Enter the jackpot and the cash value to compare the lump sum after federal and state tax with 30 annuity payments, year by year and in today's money
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Lottery Payout Calculator: Lump Sum vs Annuity After Taxes
Printed 2026-10-27 from billorganizingapp.com/income/calculators/lottery-payout/ — an estimate for planning, not financial or tax advice.
Federal tax uses the 2026 brackets for every year; later brackets are adjusted for inflation, so annuity years may come out slightly lower. Enter the cash value your lottery announces for the draw.
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Enter the advertised jackpot (the annuity amount), the cash value your lottery announces for the draw, your filing status, other taxable income and your state's tax rate on the prize. The calculator works out federal tax with the 2026 brackets, the 24% withheld when you claim and what is still owed at tax time, the lump sum you keep, each annuity payment before and after tax, and the yearly return the lump sum would have to earn to match the annuity.
How the annuity is paid
Mega Millions: the annuity is one immediate payment followed by 29 annual payments, each 5% bigger than the previous one. Powerball also pays 30 graduated payments over 29 years. With 30 payments growing 5% a year, the first payment is jackpot × 0.05 ÷ (1.05³⁰ − 1), about 1.5% of the jackpot: $1,505,144 on a $100 million jackpot, rising to $6,195,375 in the last year. The cash option is the money in the prize pool now, which is why it is much smaller than the advertised jackpot.
| Jackpot | Cash value | Lump sum after federal tax | First annuity payment | Annuity after tax, 30 payments |
|---|---|---|---|---|
| $1,000,000 | $450,000 | $310,643 | $15,051 | $778,870 |
| $10,000,000 | $4,500,000 | $2,864,755 | $150,514 | $7,038,708 |
| $100,000,000 | $45,000,000 | $28,379,755 | $1,505,144 | $63,892,642 |
| $500,000,000 | $225,000,000 | $141,779,755 | $7,525,718 | $315,892,642 |
Federal withholding vs the tax you actually owe
IRS Instructions for Form W-2G (Rev. January 2026): lottery winnings are subject to 24% federal withholding when the winnings minus the wager are more than $5,000. A large prize pushes most of it into the 37% bracket, so withholding falls short. On a $45.00 million lump sum for a single filer with $60,000 of other taxable income, federal tax is $16,620,245 (36.93%), $10,800,000 is withheld and about $5,820,245 is still due with the return. A 5% state tax lowers the lump sum kept from $28,379,755 to $26,129,755. If your state doesn't tax the prize, enter 0.
Lump sum or annuity?
In the $100 million example the annuity pays $63,892,642 after federal tax over 30 years against $28,379,755 for the lump sum today. Discounted at 4% a year, the annuity's after-tax payments are worth $33,328,757 today; the lump sum would need to earn about 5.14% a year after tax to keep up. That figure is the useful one: if you'd spend or invest the lump sum at a lower return, the annuity pays more; the lump sum gives control and flexibility now. Tax brackets are adjusted for inflation each year, so the calculator's use of 2026 brackets for every annuity year is conservative. IRS Topic 419: gambling losses are deductible only if you itemize, and only up to your gambling income.
Official sources
Tax rules, limits and pay data change. Check the current figures with the primary source before acting on them.
Frequently Asked Questions
How much tax is taken out of lottery winnings?+
24% federal withholding when the prize minus the ticket cost is more than $5,000 (IRS Form W-2G instructions), plus state withholding where it applies. The final federal bill follows your bracket: about 36.93% on a $45.00 million lump sum for a single filer.
How is the lottery annuity paid?+
For Mega Millions and Powerball, as 30 payments over 29 years: one right away and 29 more yearly. Mega Millions says each payment is 5% larger than the previous one.
How much is the first annuity payment?+
About 1.5% of the advertised jackpot when 30 payments grow 5% a year: $1,505,144 before tax on $100 million.
Is the lump sum or the annuity better?+
It depends on what you'd earn on the lump sum. In the $100 million example the lump sum must earn about 5.14% a year after tax to match the annuity; below that the annuity pays more in total value.
Why is the cash value so much less than the jackpot?+
The advertised jackpot is the total of 30 annuity payments over 29 years. The cash value is the money in the prize pool today; the annuity is funded by investing it.
Will 24% withholding cover my tax?+
Not on a large prize. The top federal rate is 37% for 2026 (above $640,600 single), so a single filer with a $45.00 million lump sum would still owe about $5,820,245 at tax time.
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