Jackpot Parameters
Estimated Net Payout
Lump Sum Option
Annuity Option (Average)
Lotto Payout Calculator: How Much Do You Actually Keep?
Winning the lottery is a life-changing event, but the "advertised" jackpot is rarely the amount that hits your bank account. Between the choice of a lump sum versus an annuity and the inevitable bite of federal and state taxes, your actual take-home pay can be significantly lower. Use our Lotto Payout Calculator to break down the math behind the prize.
Lump Sum vs. Annuity: The Great Debate
When you win a major lottery like Powerball or Mega Millions, you are presented with two primary payment methods:
- Lump Sum (Cash Option): You receive a one-time payment immediately. This is usually roughly 50% to 65% of the advertised jackpot because the advertised amount includes the interest earned over 30 years if the money were invested by the lottery commission.
- Annuity: You receive the full advertised amount, paid out in annual installments over 29 or 30 years. These payments typically increase by 5% each year to keep up with inflation.
Example Calculation: $100 Million Jackpot
If you win a $100 million jackpot and choose the cash option (at 62%), your gross cash value is $62,000,000. After a 37% federal tax ($22.94M) and a 5% state tax ($3.1M), your actual check would be approximately $35,960,000.
Understanding Lottery Taxes
The IRS considers lottery winnings as ordinary income. For the 2024 tax year, the top federal tax bracket is 37%. While the lottery office will automatically withhold 24% for federal taxes, you will likely owe the remaining 13% when you file your tax return.
State taxes vary wildly. States like Florida, Texas, and Washington have 0% state tax on winnings, while New York and Maryland have some of the highest rates in the country. Always check your local jurisdiction's laws regarding gambling winnings.
Is the Annuity Better?
The annuity provides a guaranteed stream of income and prevents you from spending the entire windfall at once. However, many financial experts suggest taking the lump sum and investing it, as the historical returns of the stock market often outperform the implied interest rate of the lottery's annuity structure.