Cash or annuity payments for US lottery winners?

April 21, 2010 by  
Filed under Lottery News

The two main US lotteries, Powerball and Mega Millions both offer jackpot winners the option to receive either a cash lump sum payout or annuity payments, with the Powerball awarding 29 annual payments while the Mega Millions Lottery awards 26 but which is better, cash or annuity payments for US lottery winners?

When a US lottery jackpot prize is advertised it is for the annuity value. For example, the current Mega Millions jackpot stands at $166 million. This is based on the jackpot winner taking the annuity option. If the winner decided to opt for the cash lump sum payout the value of their prize would be $101.6 million. In either case the figures shown are before an federal taxes which are due.

Unlike the UK National Lottery, winners of US lotteries are required to pay taxes on their winnings, which is normally around 50% of a lump sum cash payout but if the ticket holder chooses to take the annuity payment you will pay a much lower rate of tax.

Any jackpot winners who opt for annuity payments will have their winnings placed into investment funds where it will accrue interest, meaning that you will actually receive more cash for your jackpot but you will receive your winnings over the following years.

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There are various rules regarding choosing a cash payout or annuity payments depending on where the ticket was purchased. The winner may have bought an online lotto ticket or they may have picked it up in a store anywhere in America. In some US states you must decide whether you would like the cash or annuity option when you buy your lottery tickets whereas other states allow you a certain length of time after winning the jackpot to make a decision about how you want your lottery cash.

If you want to be forced to make a decision on whether to receive millions of dollars in a lump sum or over a period of years you will need to win either the Mega Millions or Powerball jackpots, which means you will need to buy tickets.

Don’t forget you can buy tickets for all of the world’s major lottery draws safely and securely online here at Online Lotto.