What a headline jackpot actually pays
The number on the billboard is the annuity: thirty payments over twenty-nine years, before any tax. Almost every winner takes the cash option instead, which is smaller, and then loses a third of it to federal tax. This calculator runs both routes from the advertised figure, a cash percentage and a tax rate.
The formula
Worked example: $200,000,000 advertised, 55% cash value, 37% tax
- Cash option before tax: $110,000,000
- Lump sum after federal tax: $69,300,000
- Annuity after tax: $4,200,000 a year for 30 years, $126,000,000 in total
The lump sum is 35% of the headline. The annuity delivers 63% of it — but spread over three decades, in dollars that lose value every year.
Cash percentage and tax rate move the result
| Jackpot | Cash value | Tax | Lump sum after tax |
|---|---|---|---|
| $200,000,000 | 55% | 37% | $69,300,000 |
| $200,000,000 | 50% | 37% | $63,000,000 |
| $200,000,000 | 55% | 45% | $60,500,000 |
| $1,000,000,000 | 55% | 37% | $346,500,000 |
The cash value is set by the lottery for each draw from current interest rates — in 2024–25 it ran between 45% and 52% of the annuity, so 55% is on the generous side. New York's top state rate of 10.9% takes a further $12 million from the $110 million cash option.
Withholding is not the tax
The lottery withholds 24% federal on payment. The winnings sit in the 37% bracket, so the remaining 13% — $14.3 million on the example — is due with the tax return. Winners who spend to the withheld figure discover this the following April.
Lump sum or annuity
The lump sum wins on paper if you can earn more than the implied rate: $110 million today against $200 million over twenty-nine years is only about 2.1% a year. Invested at 4% the lump sum ends well ahead; the annuity wins only if you would earn less than 2%. The annuity also wins for anyone who would otherwise spend it — its main value is that you cannot lose it in year two.
What this calculator leaves out
State tax, which ranges from zero (California, Florida, Texas, Washington) to 10.9%; the 30% withholding on non-resident winners; and the fact that annuity payments grow 5% a year under Mega Millions rules, so the first is smaller than $4.2 million and the last larger.
Related calculators
- Powerball calculator — the other national jackpot, same maths
- Lottery tax calculator — federal plus state on any prize
- Lottery annuity calculator — the two routes compared over time