How to Handle a Lottery Jackpot

A lottery jackpot is the prize money in a lottery drawing. In the United States, jackpots can reach life-changing amounts. They are typically advertised as annuity payments that winners will receive over decades, but most lottery winners choose to receive the money in a lump sum. While winning a large amount of money is exciting, it can also be overwhelming. Luckily, there are some things that can make it easier to handle such a windfall.

There are three big changes in lottery odds that have made eye-popping jackpots more common in recent years. The first change was when Powerball and Mega Millions stopped giving a portion of the prize to ticket purchasers who missed the winning numbers. This gave jackpots a chance to grow larger after a number of draws without a winner. This strategy boosted ticket sales and publicity.

The second change came when Powerball and Mega Millions raised ticket prices, allowing the prizes to accumulate more quickly. This change shifted the prize pool toward the jackpots and away from smaller prizes that were less popular with players.

The final change came when federal taxes were lowered in 2022. The tax on a jackpot is based on the amount of income in a year that exceeds the basic standard deduction. Winning such a large prize would put the winner into a higher tax bracket, so they will have to pay more in taxes. As a result, the real value of a lottery jackpot is often much less than what is advertised.