Lottery Lump Sum vs Annuity

It has been debated whether it is better to take the lump sum or annuity for a lottery. This calculator helps decide.

For the lump sum payment, the entire prize is paid to the winner. The effective tax rate usually ends up being close to the maximum tax bracket.

For the annuity payment, the prize is invested on behalf of the winner with a set return schedule. Games usually pay the annuity between 20-30 years. Some games give an "increase" each year. The effective tax rate is a little less with the annuity. This is because more money is taxed at the lower tax brackets.

This calculator uses 2022 the tax rates to calculate all years' taxes. Changes in future taxes would provide similar results. You can choose a popular game to load sample data or choose your own