Did you win a prize in the Powerball lottery? With the Powerball calculator (which is actually a Powerball payout calculator or a lottery lump sum vs. annuity calculator), you can estimate how much money you will receive and compare the Powerball lump sum vs. annuity payouts to make the best financial decision on your winnings.
Since you can estimate the taxes deducted from your prize, you can also apply our tool as a Powerball tax calculator. Still, you may check our lottery tax calculator if you want to learn more about taxes deducted from a lottery prize.
In the present article, you can read about the following:
- How Powerball annuity works;
- How is the Powerball annuity calculated?
- How is the Powerball annuity paid out?
- How much is the prize of Powerball after taxes?
Powerball lump sum vs. annuity
If you are lucky enough to win the lottery, you need to make an important decision on how to collect your prize. In general, there are two ways the Powerball pays out: through a lottery annuity or as a lump sum.
In general, if you would like to receive all of your money as early as possible, the lump-sum Powerball payout is the best option for you as you receive all of your jackpot at once (after taxes have been applied, of course). If you prefer to receive payouts each year over a certain period, you may choose the annuity option, which provides annual payments over time.
You can analyze both options with our tool since it works as both a Powerball lump sum calculator and a Powerball annuity calculator.
How does the Powerball lump sum work?
As we mentioned already, the winner may claim their Powerball jackpot in its cash value, or, in other words, as a lump sum. When choosing this option, the winner is paid in one lump sum. However, the cash value payout of the jackpot is much less than the one offered for an annuity Powerball payout. So, you may ask, "How much do I get if I win the Powerball?" It is about 52 percent of the total jackpot amount (before taxes). For example, if the Powerball jackpot is at $100 million, the cash value would be around $52 million.
Despite the considerable initial loss, it has its advantages, which might be attractive enough for turning to this option. For example:
- Probably the biggest advantage is that you can receive the money immediately. As the well-known proverb says — time is money.
- By obtaining your prize quickly, you can cover immediate financial expenses and spend the money immediately.
- If you're thinking about retirement or have a good investment plan, the lump-sum payment might be a reasonable choice.
How does the Powerball annuity payout work?
The other option for Powerball winners is to receive the prize in annual payments called an annuity. How many years is the Powerball annuity payout for? Well, this alternative pays the winner a specific amount annually for 30 years until the total jackpot is fully deployed.
The annuity value is paid through government bonds purchased with the jackpot's cash value. These bonds earn revenue over the annual payments, making up for the difference between the cash value and the advertised annuity jackpot value.
Powerball after taxes
It is clear that the winner cannot simply receive the total advertised amount of the Powerball jackpot immediately. However, its final amount is greatly affected by the taxes you are obliged to pay after winning a jackpot.
As for the lump-sum payment, before all other fees, it is subject to a federal withholding tax of 24%, which is then complemented by the remaining federal taxes according to the marginal rates (37% in the top tax brackets), corrected by possible deductions. Besides federal taxation, the prize is also subject to any applicable state tax depending on the winner's residence. The state tax on lottery can range from zero to around 10 percent.
In the case of annuity payouts, the amount paid annually will be added to the winner's income tax return each year and paid at tax time. Keep in mind, however, that tax rates are not set in stone and may alter over time.
How to use the Powerball payout calculator?
There are only a couple of variables required to run the Powerball payout calculator:
In the field "How much did you win?", set the Powerball jackpot you would like to analyze.
Select how you file your taxes for "What is your filing status?".
Choose your state of residence from the drop-down list asking "Where do you live?" to determine the applicable state tax rate.
You'll find a tabulated overview of the gross payout, federal taxes, state taxes, and net payout that applies to the winnings if you choose a lump sum payout or an annuity payout. In addition, you can find the yearly annuity payouts in the payout schedule as well.
How many years is the Powerball annuity payout?
The Powerball annuity payout offers winners 30 payments spread over 29 years, where payment amounts increase each year by around 5 percent.
What is the federal tax on Powerball winnings?
The federal tax on the lottery is based on the federal marginal rates, which is 37 percent in the highest bracket. In practice, there is a 24 percent federal withholding tax of the gross prize plus the remaining tax, based on your filing status.
For example, if your gross prize is $1,000,000, you need to pay $334,072 in total tax ($240,000 federal withholding plus the remaining $94,072 for single filing status in 2021).
Do I need to pay always state taxes if I win on Powerball lottery?
No. The applicable state tax range from zero to around 10 percent. Thus, lottery prizes are not subject to state taxes in states like California, Texas, or Florida.
How much do I get if I win the Powerball?
Of course, your Powerball winnings depends on the prize you win, but also greatly depends on how you opt for receiving the winning (lump-sum or annuity payout) and the applicable federal and state taxes. Use our Powerball calculator to see how much you can get with different options.
How do I calculate Powerball annuity?
You need to follow the below to estimate the annuity payments of a Powerball jackpot:
Use the following growing annuity formula to compute the payout in a given year (n):
Payout in year n = -Gross payout / [(1 − 1.0530) / 0.05] × 1.05n−1
Deduct federal tax, which is about 37% of the given annuity payout.
Deduct state tax, if applicable.
Powerball calculator disclaimer
You should consider the Powerball calculator as a model for financial approximation. All payment figures, balances, and tax figures are estimates based on the data you provided in the specifications that are, despite our best efforts, not exhaustive.
Without claiming completeness, please note the following:
The federal taxes are approximated based on the 2021 marginal tax tables published by the, without taking account of possible deductions;
All state taxes are estimated with fixed-rate calculation applicable in 2021 (without the effect of filing status, the possible existence of graduated-rate brackets, or modification in rates);
Potential additional local taxes are not considered; and
If you are not a U.S. resident, you will typically have a flat 30% federal withholding, and state taxes may differ from what is listed above.
For this reason, we created the calculator for instructional purposes only. Still, if you experience a relevant drawback or encounter any inaccuracy, we are always pleased to receive useful feedback and advice.
|Lump sum payout||Annuity payout||Difference|
|Federal Tax (24%)||$12,480,000||$24,000,000||$11,520,000|
|Federal Tax** (up to 37%)||$6,720,332||$11,809,960||$5,089,628|
** Additional Federal Tax (tax amount based on filing status minus the withheld 24% Federal Tax).
|Year||Gross Payment||Federal Taxes||State Taxes||Net Payment|