Explaining to kids how lottery taxes generally work is fun. “So you’re telling me that the government creates the lottery. Then when the lottery is won the government gets to take half of the money the people won?”
Whether you take the prize as an annuity spread out over three decades or as an immediate, reduced lump sum, 24 percent of your win is withheld for federal taxes. Yet the top marginal tax rate of 37 percent means you’d owe a lot more at tax time.