Lottery tax calculator: lump sum or annuity
Enter the advertised jackpot and the cash value the lottery announces. The calculator taxes the lump sum once and each of the 30 annuity payments in its own year, with the 2026 federal brackets and your state's.
The cash value in the example is an assumption: lotteries announce it with each jackpot, and it moves with interest rates. Estimates, not tax advice.
What the two options are
The advertised jackpot is the sum of 30 yearly payments. Powerball and Mega Millions make the first payment at once and each later one 5% larger than the one before, so the last is about four times the first. The cash option is what the lottery would spend today to buy those payments: often around half the jackpot, depending on interest rates.
Why the tax differs
The lump sum is taxed in a single year, almost all of it at the top federal rate of 37% and your state's top rate. The annuity spreads the prize over 30 tax years, but for a large jackpot each payment is still big enough that most of it reaches the top bracket too, so spreading saves less tax than many expect. What mostly separates the options is time: the lump sum can be invested, the annuity cannot.
Reading the result
The last figure is the yearly return at which the after-tax annuity is worth exactly the after-tax lump sum today. If you could earn more than that after tax, the lump sum comes out ahead; if less, the annuity does. The calculator does not say which to choose: that depends on your plans, your age and your advisers.
Questions
How much federal tax is withheld from a lottery jackpot?
24% of the prize, whichever option you take. The final federal tax on a jackpot is closer to 37%, so the rest is due with your return.
Do all states tax lottery winnings?
No. Nine states have no income tax on them, and California and Pennsylvania do not tax prizes of their own state lottery. See every state.
Will the annuity be taxed at today's rates?
No one knows. Each payment is taxed under the law of the year it is paid; the calculator uses the 2026 brackets for all 30 years.
Updated: