Lottery Annuity Calculator — Annuity vs. Lump Sum
Decide between the annuity and the lump sum: enter the advertised jackpot, how many annual payments it covers, the discount rate your state applies to derive the cash value, and your combined tax rate. The calculator shows what each option is actually worth after tax.
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Present value of the annuity stream, after applying your tax rate
- 1
Annual gross payment
500,000,000 ÷ 30 = 16,666,667 - 2
Present-value annuity factor
[1 − (1 + 0.05)^(−30)] ÷ 0.05 = 15.3725Converts the stream of equal annual payments to a single present value. - 3
Lump sum (pre-tax)
16,666,667 × 15.3725 = 256,207,517 - 4
Lump sum after tax
256,207,517 × (1 − 37%) = 161,410,736
How does this calculator work?
The annuity pays Jackpot ÷ n each year for n years; the lump sum is its present value: PMT × [1−(1+r)^−n]/r. At a 5% discount rate over 30 payments, the lump sum is roughly 60% of the jackpot before the 37%+ US tax. After combined taxes, expect to keep about 35-40% of the advertised figure.
Formula
How this is calculated
When a lottery advertises a jackpot, that headline figure is the annuity value — the sum of all annual payments made over many years (30 payments for Powerball and Mega Millions). The lump-sum (cash) option is worth less today because payments due in the future are discounted: a dollar received ten years from now is worth less than a dollar today. The discount rate in the formula represents the return you could earn by investing the lump sum immediately.
The lump-sum present value is calculated with the standard annuity formula: PMT × [1 − (1+r)^(−n)] / r, where PMT is the equal annual payment, r is the annual discount rate, and n is the number of payments. If the discount rate is zero, the lump sum equals the full jackpot.
Both the annuity and the lump sum are subject to income tax. US winners face up to 37% federal tax (2025 rate, editable) plus state tax ranging from 0% to around 10%. The after-tax comparison is the number that actually lands in your bank account. The year-by-year chart shows how your cumulative after-tax annuity receipts build over the payment period.
Frequently asked questions
It depends on your personal discount rate and tax situation. If you can invest the lump sum at a return higher than the discount rate used to price it, the lump sum may grow to more than the annuity total. If you prefer guaranteed income or worry about spending discipline, the annuity provides a steady stream. Most financial advisors note that the lump sum is worth roughly 50-60% of the advertised jackpot before tax.
Because the jackpot figure is the total of all future annual payments. The lump sum is the present value of those payments — accounting for the fact that money paid years from now is worth less today at the applicable discount rate. At a 5% discount rate over 30 years, this typically brings the cash value to about 60% of the advertised jackpot before tax.
In the US, the federal withholding rate on large lottery prizes is 24% (2025), but your total federal liability at the top bracket is 37%. State tax adds another 0–10% depending on your state; seven states have no income tax. Enter your combined estimated rate, or use 37% + your state rate as a conservative estimate.
Also known as
TG we-Calculate Editorial Team. (2026). Lottery Annuity Calculator — Annuity vs. Lump Sum [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/lottery-annuity-calculator
TG we-Calculate Editorial Team. "Lottery Annuity Calculator — Annuity vs. Lump Sum." TG we-Calculate. 2026. https://we-calculate.com/calculator/lottery-annuity-calculator.
TG we-Calculate Editorial Team, "Lottery Annuity Calculator — Annuity vs. Lump Sum," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/lottery-annuity-calculator
@misc{wecalculate_lottery_annuity_calculator, title = {Lottery Annuity Calculator — Annuity vs. Lump Sum}, author = {{TG we-Calculate Editorial Team}}, howpublished = {\url{https://we-calculate.com/calculator/lottery-annuity-calculator}}, year = {2026}, note = {TG we-Calculate} }
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