How to Calculate a Lump Sum Lottery Payment

Lottery balls
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Winning the lottery is exciting, but don't expect to get all that cash in a single payout. Lottery winnings are calculated based on payouts that last a set period of years, often 25 to 30, and it is only with the final payment that you'll have received the full amount. If you want to get all of your money sooner, you can have your winnings paid as a single lump sum. If you make this choice you can expect to get less than half the face value of the amount. You need to read the rules related to a lump sum payout, since the amount paid can vary from one game to the next.


Figuring it Out

The stated payout level is your base amount. You will then need to subtract the amount specified by the rules for federal withholding -- typically 25% -- and also subtract any amounts due for state and local income tax withholding. The remaining amount is the total of your lump sum payment. For example, if you win $1 million, your lump sum payout is half of that, or $500,000. Federal withholding is 25% of the payout, or $125,000. If your state has a 7% income tax it will withhold that amount as well -- in this example, $35,000. The resulting lump sum payout is $340,000. If you don't want to figure it all out yourself, try using one of the free lump sum payout calculators available online.

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