Lottery Payout Calculator

With a typical cash value of 48 % ($240 million), 24 % federal withholding ($57.6 million) and a 5 % state tax ($12 million), the check is about $170 million, and after the remaining federal tax at the top rate the lump sum nets roughly $139 million. The annuity pays about $290 million net over 30 years, but only $4.4 million net in year one.

The annuity pays more in total (the advertised jackpot, before tax) because the lottery invests the cash value in government bonds for you. The lump sum wins if you can invest it yourself at a return above the annuity’s implied rate (usually 4–5 %) and have the discipline to do so. Most winners take the cash; financial advisers are split. The annuity also protects against spending it all.

Powerball and Mega Millions pay one instalment immediately and 29 more annually, each 5 % larger than the last. For a $500 million jackpot the first payment is about $7.5 million and the thirtieth about $31 million. If the winner dies, the remaining payments go to the estate.

The advertised jackpot is the total of the 30 annuity payments. The cash value is what the lottery would need today to buy the bonds funding those payments — the present value. It moves with interest rates: higher rates mean a lower cash percentage (around 45–50 %), lower rates a higher one (55–60 %). The exact cash value is published with every drawing.

As ordinary income. A fixed percentage is withheld by the lottery before payout, and because a large win pushes almost all of it into the top federal bracket, more is due at tax time — the calculator separates the withheld amount from the total federal bill. State treatment varies: some states tax winnings at their income-tax rate, a few withhold extra, and several (for example California, Florida, Texas and Washington) tax lottery prizes not at all. Enter your rates; the calculator never assumes a year.