How lottery annuity payments are calculated
Powerball and Mega Millions pay their annuity as 30 graduated payments: one immediately and 29 yearly payments, each 5% larger than the one before. For a jackpot J, the first payment is J × 0.05 ÷ (1.0530 − 1) — about 1.505% of the jackpot — and payment n is the first payment × 1.05n−1. The 30 payments add up to J.
For a $500 million jackpot the first payment is $7,525,718 and the last is $30,976,874, before tax.
Comparing the annuity with the lump sum
The lump sum is the cash value of the prize pool, usually less than half the advertised jackpot. The calculator taxes each annuity payment in its own year and the lump sum in one year, then discounts the annuity to today's money at the rate you choose. It shows the numbers; which option suits you depends on your circumstances.
The cash value here is estimated at 45% of the jackpot. For a real drawing, use the Powerball annuity calculator or the Mega Millions annuity calculator, which use the official cash value, and check state rates in lottery tax by state.
Common questions
How do lottery annuity payments work?
For Powerball and Mega Millions, the annuity is 30 payments over 29 years. The first is paid when you claim; the rest arrive once a year, each 5% larger than the previous payment. The total of all 30 payments equals the advertised jackpot.
Why is the lump sum so much smaller than the jackpot?
The advertised jackpot is the total of 30 annuity payments spread over 29 years. The lump sum is the cash in the prize pool today — roughly the amount needed to fund those payments — so it is usually well under half of the advertised figure.
Does the annuity mean lower taxes?
Usually only slightly. Each payment is taxed in the year you receive it, so for a large jackpot most of every payment is still taxed at the top federal rate. The main difference is timing: tax is paid over 30 years instead of in one.