The headline jackpot is not what you win
The number on the billboard is the annuity total: a stream of payments spread over about 30 years. Take the cash instead and you get the lump sum — typically only around half the advertised figure — and then taxes take their cut of whatever you choose. The real question is which option leaves you better off, and the only honest way to answer it is to compare both after tax and in today’s dollars.
The comparison
lump net vs. Σ net paymentk ÷ (1 + d)k
The lump sum is taxed once and received today. Each annuity payment is taxed, then discounted back to the present at rate d and summed. Comparing the lump net against that present-value total is the apples-to-apples test most calculators skip.
What makes this calculator different
- After-tax, present-value comparison. We don’t just slap one tax rate on the jackpot — we discount the after-tax annuity stream into today’s dollars so you can fairly compare it to the cash.
- State tax included. State tax can swing your take-home by millions. Add your rate and see it folded into the result.
- Graduated annuity payments. Real jackpots (like Powerball) raise each annual payment ~5%. We model that growth instead of assuming 30 equal cheques.
- The number that matters. Your actual take-home — and a clear recommendation with the reasoning behind it.
Frequently asked questions
Lump sum or annuity — which should I take?+
It depends on the discount rate, which is really the return you expect to earn on the money. The annuity’s after-tax total looks bigger because it’s spread over ~30 years, but money you receive decades from now is worth less than money today. If you can reliably earn more than the lottery’s implied annuity return, the lump sum invested yourself wins; if you can’t — or you worry about overspending a giant cash windfall — the annuity’s guaranteed, growing payments can be the safer choice. This calculator puts both on an equal footing: after-tax, in today’s dollars.
Why isn’t the 24% withholding my final tax bill?+
The IRS requires lotteries to withhold 24% of large winnings up front, but lottery prizes are ordinary income. A nine-figure jackpot lands you in the top federal bracket — currently 37% — so you typically owe the difference (about 13 more points) when you file. That’s why this calculator defaults to a 37% federal rate rather than the 24% you see withheld at the counter. The withholding is a down payment, not the bill.
Do states tax lottery winnings?+
Most do, at rates that range from a few percent to over 10%, and a handful (including California, Florida, Texas, and Washington) don’t tax lottery prizes at all. State tax stacks on top of federal tax, so it can swing your take-home by millions. Enter your state’s rate to fold it into the combined tax figure — leave it at 0 if you’re in a tax-free state.
What is present value and why does it matter here?+
Present value answers “what is a future payment worth to me today?” A dollar paid in 20 years is worth less than a dollar now, because today’s dollar can be invested and grow. We discount each annuity payment back to today using your discount rate and add them up. That present-value total — not the headline annuity number — is the fair amount to compare against the lump sum. A higher discount rate shrinks the annuity’s present value and favors taking the cash.
What should I actually do if I win?+
Before claiming, sign the ticket, secure it, and stay quiet. Assemble a team — a fee-only financial advisor, a tax attorney, and a CPA — before you choose lump sum or annuity, because the decision is irreversible and the tax stakes are enormous. Decide whether your state allows anonymous claims. And remember this calculator is a simplified, flat-rate estimate to frame the decision, not tax or financial advice.
Disclaimer: This calculator is for educational purposes only. It uses a simplified flat top-rate tax estimate — real federal tax is progressive, only ~24% is withheld up front, and state rules vary by jurisdiction. It is not tax or financial advice. Consult a qualified professional before making any decision.