Lump sum or annuity: which pays more after tax?
Current Powerball jackpot $360 million, winner living in Texas, single filer.
The cash option wins only if it earns more than
5.47% a year, after tax
Below that return the annuity pays more; above it, the cash does. Cash kept: $96.8 million. Annuity kept: $228.3 million over 29 years.
Jackpot data as of Sep 24, 2026, for the Saturday, Sep 26 drawing.
| Cash option | Annuity (30 payments) | |
|---|---|---|
| Before tax | $153,600,000 | $360,000,000 |
| Total tax | −$56,782,000 | −$131,700,008 |
| You keep | $96,818,000 | $228,299,993 |
| In today's dollarsannuity discounted at 3% a year | $96,818,000 | $138,238,859 |
| When you get it | All at once | $3.5 million now, then yearly up to $14.1 million |
The annuity keeps $131.5 million more after tax in total but pays it over 29 years; the cash would need to earn 5.47% a year after tax to fund the same payments. How to think about the choice.
Break-even calculator
Suppose you take the cash, invest what is left after tax, and pay yourself exactly what the annuity would have paid after tax each year. Does the money last all 30 years?
At 5% a year the cash runs out in 2054, before the last annuity payment.
Year-by-year balance at 5%
| Year | Withdrawn (= annuity after tax) | Balance after withdrawal |
|---|---|---|
| 2026 | $3,463,665 | $93,354,335 |
| 2027 | $3,634,349 | $94,387,703 |
| 2028 | $3,813,566 | $95,293,522 |
| 2029 | $4,001,744 | $96,056,454 |
| 2030 | $4,199,331 | $96,659,945 |
| 2031 | $4,406,798 | $97,086,144 |
| 2032 | $4,624,638 | $97,315,813 |
| 2033 | $4,853,370 | $97,328,234 |
| 2034 | $5,093,538 | $97,101,108 |
| 2035 | $5,345,715 | $96,610,448 |
| 2036 | $5,610,501 | $95,830,469 |
| 2037 | $5,888,526 | $94,733,466 |
| 2038 | $6,180,452 | $93,289,687 |
| 2039 | $6,486,975 | $91,467,196 |
| 2040 | $6,808,824 | $89,231,732 |
| 2041 | $7,146,765 | $86,546,554 |
| 2042 | $7,501,603 | $83,372,278 |
| 2043 | $7,874,184 | $79,666,708 |
| 2044 | $8,265,393 | $75,384,651 |
| 2045 | $8,676,162 | $70,477,721 |
| 2046 | $9,107,471 | $64,894,137 |
| 2047 | $9,560,344 | $58,578,499 |
| 2048 | $10,035,861 | $51,471,563 |
| 2049 | $10,535,154 | $43,509,987 |
| 2050 | $11,059,412 | $34,626,074 |
| 2051 | $11,609,883 | $24,747,495 |
| 2052 | $12,187,877 | $13,796,993 |
| 2053 | $12,794,771 | $1,692,072 |
| 2054 | $13,432,009 | −$11,655,334 |
| 2055 | $14,101,110 | −$26,339,210 |
What the numbers leave out
Control and flexibility. The cash can pay off debts, buy a home or be given away now. Gifts above the annual exclusion count against the lifetime gift and estate exemption, so large gifts need planning.
Protection from yourself and others. The annuity cannot be spent in one year. Winners who worry about pressure from relatives, bad investments or their own spending often choose it for that reason.
Tax-law risk. Annuity payments are taxed under the rules of the year they are paid. If federal or state rates rise, the annuity loses; if they fall, it gains. The figures here assume 2026 rules for every year.
Death. Remaining annuity payments go to your estate; they do not stop. Estate tax may be due on their value, which is one reason winners who choose the annuity work with an estate attorney.
Inflation. The 5% yearly increase offsets inflation in most years. In today's dollars (discounted at 3% a year) the annuity above is worth $138.2 million after tax.
Questions
Is it better to take the lump sum or annuity?
After tax, the annuity pays more in total, but the lump sum wins if you can earn more than 5.5% a year after tax on it. The annuity is also protection against spending too fast; the lump sum gives control, flexibility and something to leave if you die early (though annuity payments do pass to your estate).
How is the lottery cash option calculated?
The cash option is the money in the jackpot prize pool. The advertised jackpot is what that pool would buy as a 30-payment annuity at current interest rates, which is why the cash is 42.7% of the advertised Powerball jackpot right now; when rates rise the ratio falls.
Can you change from annuity to lump sum later?
Generally no. The choice is made when you claim, within the deadline your state lottery sets. Companies that buy annuity payments offer a lump sum later, but at a steep discount.
Do you pay less tax with the annuity?
Slightly, in total rate terms, because each payment uses the lower brackets again every year, but on jackpot-size payments almost everything is still taxed at 37% federal. The bigger difference is timing: the annuity's tax is spread over 30 years.
These figures describe the taxes on a prize that has already been won; they are not a reason to buy a ticket. Jackpot odds are hundreds of millions to one. If gambling is causing problems for you or someone close to you, call or text 1-800-GAMBLER (National Problem Gambling Helpline, 24/7).
Sources for this page
- Powerball official site (current jackpot and cash value) (checked Sep 24, 2026)
- Report of the official jackpot estimate used here (checked Sep 26, 2026)
- IRS: 2026 inflation adjustments (Rev. Proc. 2025-32) (checked Sep 26, 2026)
- IRS Publication 505: withholding on gambling winnings (checked Sep 26, 2026)
Figures are estimates for planning, not tax or legal advice. How they are calculated: methodology. Read the disclaimer.