Annuity vs Lump Sum Calculator
2026 rulesCompare a jackpot's cash option with its 30 annual payments.
Your numbers
Powerball and Mega Millions cash values often run 45-50%.
Powerball and Mega Millions annuities rise 5% a year.
Result
Higher value at your return
- Cash option before tax$46,000,000
- Cash option after tax$26,680,000
- First annuity payment before tax$1,505,144
- Last payment$6,195,375
- Annuity value today at your return$45,154,305
- Annuity value after tax$26,189,497
- Return the cash must beat to match the annuity4.87%
Federal withholding on lottery prizes is 24%, but large prizes owe the top 37% rate. Annuity payments to your estate continue if you die early.
How it works
Powerball and Mega Millions annuities pay one immediate payment and 29 more, each 5% larger than the last. The cash option is the money set aside to fund them, usually 45% to 50% of the advertised jackpot.
The break-even return is the rate at which both choices are worth the same. If you think you can earn more after tax, the lump sum is worth more.
2026 figures: IRS Rev. Proc. 2025-32 (2026 inflation adjustments).
Questions
How are lottery winnings taxed?
As ordinary income in the year received. Lotteries withhold 24% federally, but large prizes owe 37% on most of the amount, plus state tax in most states.
Does the annuity avoid a big tax bill?
It spreads the income over 30 years, but each payment is still likely to be in the top bracket.