Methodology: How We Calculate Lottery Taxes

Every figure on the site comes from the same calculation. This page lists each step and every assumption, so you can check it or redo it.

1. Advertised jackpot and cash value

The advertised jackpot is the total of 30 annuity payments. The cash value is what the game says the prize pool is worth today. For the current jackpots we use the official cash value published by the game (currently $153.6 million for Powerball and $124.1 million for Mega Millions).

For hypothetical amounts (the "$500 million" pages) no official cash value exists, so we estimate it with the ratio of the latest official cash value to the advertised jackpot for that game: 42.67% for Powerball and 41.37% for Mega Millions. The ratio moves with interest rates; we update it when it changes by more than one percentage point, and every page that uses it says so.

2. Federal tax

At claim: the lottery withholds 24% of the prize when proceeds (prize minus the ticket price) are more than $5,000 (IRS Publication 505). This is a prepayment, not the final tax.

At filing: the prize is ordinary income. We apply the 2026 brackets from IRS Revenue Procedure 2025-32 for the chosen filing status after the standard deduction, with no other income unless you enter some in the calculator. On a jackpot almost everything falls in the 37% bracket (over $640,600 for single filers). "Owed at filing" is the liability minus what was withheld.

Not included: itemized deductions, credits, the alternative minimum tax, and investment income earned later on the winnings. The 3.8% net investment income tax does not apply to lottery winnings themselves.

3. State and local tax

For each state we record whether it has an income tax, whether it taxes lottery prizes, whether it exempts prizes from its own lottery (California does), the rate, the lottery's withholding at claim, and whether it taxes non-residents who bought a ticket there.

Rate used: a jackpot is taxed almost entirely at a progressive state's top rate, so we apply the top marginal rate (including surtaxes such as Massachusetts' 4% on income over about $1 million) to the whole prize. For prizes of a few hundred thousand dollars or less this slightly overstates the state tax; the calculator says so when it matters.

Local taxes: New York City (3.876% of the prize) and Yonkers (16.75% of the state tax) are included when chosen. Other local income taxes that can apply to prizes, such as Maryland and Indiana county taxes, Ohio city taxes or Portland-area taxes in Oregon, vary by address and are described on the state's page but not added to the figures.

Ticket bought in another state: the ticket's state taxes a non-resident first (if it taxes non-residents); the home state taxes the prize too but credits the tax paid to the other state, up to its own tax. The result is the higher of the two. Local taxes of the home city still apply.

No state lottery: residents of Alabama, Alaska, Hawaii, Nevada and Utah must buy tickets elsewhere; their pages assume the ticket's state does not tax non-residents.

4. The annuity

Both games pay the annuity as one payment at claim and 29 yearly payments, each 5% larger than the last, adding up to the advertised jackpot. The first payment is P = J × g ÷ ((1 + g)³⁰ − 1), with J the jackpot and g = 5%.

Each payment is taxed as income in the year it is received. Future brackets and state rates are unknown, so every year uses the 2026 brackets, standard deduction and state rules, with no other income. Payments are not adjusted for inflation; the lump-sum comparison also shows the annuity in today's dollars, discounted at 3% a year.

5. Lump sum versus annuity

The break-even return is the annual after-tax return at which the cash (after tax) would fund exactly the same after-tax payments as the annuity. It is the rate r that makes the present value of the 30 after-tax annuity payments equal to the after-tax lump sum, found numerically.

6. Rounding and freshness

Calculations use full precision; headline figures are rounded to the nearest $0.1 million. Jackpot values are refreshed after each drawing. When a refresh fails, pages keep the last confirmed value and show a notice saying it may be out of date. State rules were last checked on Sep 26, 2026; where a rule could not be fully confirmed against an official source the page says so and is kept out of search results until it is.

7. Not advice

These are estimates for planning. Your actual tax depends on your whole return. Talk to a tax professional before claiming a prize. See the disclaimer.