Penny Runs the NumbersOn the $847 million Powerball jackpot of 2026-11-04, the $363.1 million cash option leaves $229 million after federal tax and the 30-payment annuity leaves $535 million. If every after-tax dollar is invested at 4% a year, the annuity is ahead after 29 years ($869M vs $714M). The lump sum wins only if it earns more than 5.4% a year after tax, and that break-even is the same in every state.
What the calculator shows
Set the advertised jackpot, where you live and the yearly return you expect on invested money. The cards show the cash option after tax, the total of the 30 annuity checks after tax, the federal tax bill still due in April, and the return at which the lump sum overtakes the annuity.
The chart invests both choices at the same return: the lump sum from day one, and every annuity check as it arrives. The marker shows the value of each pile in any year up to year 29, when the last check is paid.
Why winners get a tax bill in April
Lotteries withhold 24% of a large prize for federal income tax, as the IRS requires for winnings over $5,000. A jackpot this size, though, is taxed mostly at the top 37% rate. On the $363.1 million cash option, 24% is $87 million withheld while the federal tax is $134 million, so about $47 million more is due with the tax return.
State tax depends on where you live. Texas and Florida have no state income tax, and California does not tax California Lottery prizes. New Jersey's top rate is 10.75%, and New York City residents pay New York State's 10.9% plus the city's 3.876%. In New York City the cash option shrinks to $175 million.
The number that decides it: 5.4%
The annuity pays one check now and 29 more, each 5% larger than the last. Taking the cash means giving those checks up for a smaller amount today. Investing the after-tax lump sum has to beat about 5.4% a year, after tax, every year for 29 years, to end up ahead.
Because both choices are taxed at nearly the same rate, state tax changes how much you keep but barely moves that break-even. Below 5.4% the annuity ends ahead; above it, the lump sum does. At 6% a year the lump sum ends at $1.24 billion versus $1.15 billion.
Questions
Is the lump sum or the annuity better after taxes?
It depends on the return you can earn. With the default $847 million jackpot, the after-tax cash option ($229 million) beats the annuity only if it is invested at more than about 5.4% a year after tax for 29 years. Below that, the annuity's after-tax checks ($535 million in total) end up worth more.
How much tax is withheld from a Powerball jackpot?
Federal withholding is 24% of the prize, but the top federal rate is 37%. On a $363.1 million cash option, $87 million is withheld while the federal tax is $134 million, leaving about $47 million to pay with the tax return. States may withhold their own tax on top.
Which states don't tax lottery winnings?
States without a personal income tax, such as Texas and Florida, do not tax the prize. California has an income tax but exempts California Lottery prizes, including Powerball. New Jersey taxes income over $1 million at 10.75%, and New York City residents pay about 14.8% combined state and city tax.
What does this calculator leave out?
It uses 2026 single-filer federal brackets for all 30 years, applies the state's top rate to the whole prize, and keeps the cash-to-jackpot ratio of the 2026-11-04 drawing. It ignores other income, estate tax, spending and the risk of losing invested money. The annuity continues to the estate if the winner dies.
Sources and assumptions
- Powerball estimated jackpot for the 2026-11-04 drawing (won by one ticket in New Jersey): Powerball.com draw results, 2026-11-04 (checked 2026-11-11)
- Cash value $363.1 million / jackpot $847 million for the same drawing; held constant when the jackpot slider moves: Powerball.com draw results, 2026-11-04 (checked 2026-11-11)
- Powerball annuity option: one immediate payment followed by 29 annual payments that increase by 5% each year: Powerball.com FAQs (checked 2026-11-11)
- Federal withholding on lottery winnings over $5,000 (regular gambling withholding): IRS, Instructions for Forms W-2G and 5754 (checked 2026-11-11)
- 2026 federal income tax brackets, single filer: IRS, tax inflation adjustments for tax year 2026 (checked 2026-11-11)
- California: California Lottery winnings (including Powerball) are not taxed by the state: California Franchise Tax Board, Gambling income (checked 2026-11-11)
- New York State 10.9% (over $25,000,000) + New York City 3.876% (over $50,000), single filer schedules: NY Department of Taxation and Finance, Instructions for Form IT-201 (tax rate schedules) (checked 2026-11-11)
- New Jersey gross income tax rate on income over $1 million (since tax year 2020): NJ Division of Taxation, Important income tax changes (checked 2026-11-11)
- Texas: personal income tax prohibited by the Texas Constitution, Art. 8, Sec. 24-a (Florida also has no personal income tax): Texas Constitution, Article 8 (checked 2026-11-11)
- Federal tax uses 2026 single-filer brackets on the prize alone (no other income, no deductions) and keeps 2026 brackets for all 30 annuity years.
- State and city tax is a flat top rate on the whole prize; real schedules are slightly lower on the first dollars and NY's 10.9% starts at $25 million.
- Cash value = jackpot × 0.4287 (ratio from the 2026-11-04 drawing); the real ratio depends on interest rates at the time of the drawing.
- Both choices are compared as if every after-tax dollar is invested at the same yearly return; the result is measured at year 29, when the last annuity check arrives.
- Ignores estate tax, gifts, spending and the risk of losing the money; the annuity continues to the estate if the winner dies.
Last updated 2026-11-11.