Lottery Annuity Calculator
Enter your jackpot size, choose your state, and this calculator shows your full annuity payment schedule alongside the after-tax lump-sum value. You can see how every annual payment grows, what taxes come out each year, and whether taking the cash option beats 30 years of payments once you account for investing returns.
Annuity vs. lump sum: how each option works
When you win a large lottery jackpot in the United States, you almost always choose between two payout structures. The annuity option pays the full advertised jackpot across a series of annual payments, typically 30 for Powerball and Mega Millions, with each payment growing by 5% over the previous year. The lump-sum (cash) option gives you a single immediate payment worth roughly 50-65% of the advertised prize. That headline haircut exists because the advertised jackpot equals the face value of the annuity bonds the lottery purchases; the cash option is just the net present value of those bonds at current interest rates. Neither option is automatically better: the right choice depends on how much you trust yourself to invest wisely, what tax bracket each payment pushes you into, and how long your time horizon is.
How the growing-annuity formula works
A lottery annuity is a "growing annuity": a stream of payments where each one is larger than the last by a fixed percentage. To find the first-year payment, the formula is P1 = jackpot x g / ((1 + g)^t - 1), where g is the annual growth rate (e.g. 0.05 for 5%) and t is the number of years. Each subsequent payment is P1 x (1 + g)^(n-1) for year n. When the growth rate is zero (flat annuity), the formula simplifies to jackpot / t. The cumulative total of all payments always exceeds the advertised jackpot because the growth compounds, but that extra amount is spread over decades and worth less in today's dollars once you apply a discount rate.
Taxes: the single biggest factor
Lottery winnings in the United States are ordinary income taxed at ordinary rates. The top federal bracket is 37% for income above about $609,000 (single filer, 2024). A large lump sum pushes almost all of it into that top bracket in one year, while the annuity spreads taxable income across 30 years. However, the annuity payments on a major jackpot are still large enough to hit the 37% bracket every year, so the per-year tax rate is similar. State taxes vary dramatically: Florida, Texas, Nevada, and several others have no state income tax on lottery wins, while New York and New Jersey levy over 10%. The calculator estimates effective federal tax using the actual 2024 bracket structure and applies the approximate top state rate; consult a tax attorney for a precise figure because local taxes, deductions, and credits all affect the real number.
Present value: the fair comparison
Comparing the total annuity (say $1 billion) to the lump sum (say $600 million) is misleading because money received in the future is worth less than money today. The fair comparison discounts each future annuity payment back to today using your expected investment return. If you can reliably earn 7% per year on the lump sum, and the discounted present value of the annuity at 7% is less than the after-tax lump sum, the cash option comes out ahead. If you are conservative and expect only 3% returns, the guaranteed annuity stream often wins on a present-value basis. This calculator shows both the raw totals and the present-value comparison so you can choose your own discount rate.
Major US lottery payout structures
| Lottery | Annuity term | Annual increase | Cash option (approx.) |
|---|---|---|---|
| Powerball | 30 years | 5% per year | ~60% of jackpot |
| Mega Millions | 30 years | 5% per year | ~60% of jackpot |
| Lucky for Life | Life | None (flat) | $7 million lump sum (top prize) |
| Mega Sena (BR) | 35 years | Varies | N/A (annuity only) |
Typical payout terms for the largest US lottery games.
Frequently asked questions
What percentage of the jackpot is the lump sum?
For Powerball and Mega Millions the cash option is typically about 60% of the advertised jackpot, though it fluctuates with interest rates. When interest rates are high the lottery can buy annuity bonds more cheaply, so the cash value falls relative to the headline prize. The default in this calculator is 60%; you can adjust it to match your specific offer.
How much tax do you pay on a lottery jackpot?
Federal income tax at the top bracket (37% for income over about $609,000 in 2024) applies to virtually all of a large jackpot, whether taken as a lump sum or annuity. On top of that, your state may withhold its own income tax. New York adds 10.9%, New Jersey 10.75%, California 13.3%, while Florida, Texas, Nevada, and several others add nothing. The effective federal tax rate is slightly below the top marginal rate because the lower brackets still apply to the first portion of income, and this calculator uses full bracket math to capture that difference.
Is the annuity or lump sum better?
It depends on your discount rate and investment discipline. If you can invest the after-tax lump sum at a rate higher than the annuity's growth rate (typically 5%), and if you do so consistently for 30 years, the lump sum usually beats the annuity on a present-value basis. If you are likely to spend it quickly, invest poorly, or simply prefer guaranteed lifetime income, the annuity is safer. Most financial literature suggests the lump sum wins for a disciplined, long-term investor, but the annuity protects against overspending and bad markets.
What is the present value of a lottery annuity?
Present value is the lump sum you would need today, invested at your expected return, to replicate all future annuity payments. For a $1 billion jackpot paid over 30 years with 5% annual growth, the present value at a 7% discount rate is substantially less than $1 billion. This calculator computes that figure and compares it to the after-tax lump sum so you see which option is worth more in today's dollars.
Can I sell my lottery annuity payments?
In most US states, yes. A structured-settlement purchasing company will offer you a lump sum in exchange for some or all of your remaining payments, but they apply a steep discount rate (often 9-15%) and charge fees, so you will typically receive significantly less than the present value. Court approval is required in many states. If you need immediate cash, this is an option, but the effective discount makes it expensive.
Does the jackpot grow if nobody wins?
Yes. Lottery jackpots accumulate from ticket sales until someone wins. The advertised amount rises each rollover, and the cash-option value rises proportionally. This does not change the annuity structure (the growth rate and term stay fixed), but it increases the absolute size of each payment.
How are Powerball annuity payments structured?
Powerball pays the first annuity installment immediately after claiming, then 29 more annual payments. Each payment is 5% larger than the previous one. So if your first-year payment is $10 million, the second is $10.5 million, the third $11.025 million, and so on. The total across all 30 payments equals the advertised jackpot before taxes.