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Cash vs Annuity

Powerball jackpot winners have the option of receiving their winnings as a one-off cash lump sum, or as annuity payments.

The annuity option entitles you to the full advertised jackpot amount (minus taxes), in 30 payments over 29 years. The first payment will be made immediately and each subsequent payment increases by 5%.

The benefits of annuity payments are that you receive the full jackpot amount, as opposed to a reduced cash value (see below), and you have the security of receiving a steady income for the foreseeable future.

Many winners choose to receive the jackpot as a one-off cash lump sum. However, the value of a lump sum payout is always less than it would be for the annuity option. This is because the cash prize represents the actual funds in the jackpot pool at the time of the draw, while the annuity value is based on the lottery’s expected return from investing the cash sum over 29 years. The annuity sum is guaranteed to the player and they receive the full amount even if the lottery makes investments that do not achieve the expected return.

If an annuity winner dies before receiving all of their payments, the prize transfers to their estate or to a beneficiary designated by them. Different states have different rules on whether the estate receives annual payments or the balance of the award.

Prize Rules

Powerball prizes must be claimed in the state where the tickets were purchased. Each state has its own rules about when prizes must be claimed and it is the responsibility of the player to come forward in time. Visit the How to Claim page for more information. Winning tickets must be checked and validated by the lottery operator in the state where the ticket was bought, or by an agent of the operator, such as an authorized retailer, before prizes can be paid out.

Anyone who wins a large Powerball prize must pay federal taxes in the US, regardless of whether or not they are a resident. This is set at a rate depending on your total annual income (including money from lottery winnings). The lottery makes an immediate 25 percent federal withholding on prizes of more than $5,000, and most states levy a local withholding, although Tennessee and South Dakota do not.

Below are the tax withholdings by state, although certain other factors – such as residency – could affect these. For further advice, consult a professional financial advisor.

State Taxes on Powerball Payouts
State/Jurisdiction State Tax
Arizona 5.0%
Arkansas 7.0%
California 0.0%
Colorado 4.0%
Connecticut 7.0%
Delaware 6.6%
Florida 0.0%
Georgia 6.0%
Idaho 7.4%
Illinois 3.8%
Indiana 3.4%
Iowa 5.0%
Kansas 5.0%
Kentucky 6.0%
Louisiana 5.0%
Maryland 8.8%
Maine 5.0%
Massachusetts 5.0%
Michigan 4.3%
Minnesota 7.3%
Missouri 4.0%
Montana 6.9%
Nebraska 5.0%
New Hampshire 0.0%
New Jersey 3.0%
New Mexico 6.0%
New York 8.8%
North Carolina 5.8%
North Dakota 2.9%
Ohio 4.0%
Oklahoma 4.0%
Oregon 8.0%
Pennsylvania 3.1%
Puerto Rico 0.0%
Rhode Island 6.0%
South Carolina 7.0%
South Dakota 0.0%
Tennessee 0.0%
Texas 0.0%
U.S. Virgin Islands 0.0%
Vermont 6.0%
Virginia 4.0%
Washington D.C 8.5%
Washington State 0.0%
West Virginia 6.5%
Wisconsin 7.8%
Wyoming 0.0%

About This Article

wikiHow is a “wiki,” similar to Wikipedia, which means that many of our articles are co-written by multiple authors. To create this article, 23 people, some anonymous, worked to edit and improve it over time. This article has been viewed 1,040,576 times.

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Co-authors: 23

Updated: March 22, 2020

Views: 1,040,576

Categories: Games of Chance

To play Powerball, start by selecting 5 numbers between 1 and 69, which will be the white balls in the drawing, and 1 number between 1 and 26, which will be the red ball. Then, after the drawing, compare the numbers you chose to the winning numbers. If all of your numbers match, including all the white balls and the red ball, you win the jackpot! However, you can still win smaller prizes even if only some of your numbers match. For example, if you match the red ball and 3 of the white balls, you win $100 USD! To learn how to tell if you won other prizes based on the numbers you chose, keep reading!

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