Learn how lottery annuity payments work and which option might be right for you
A lottery annuity provides winners with a series of annual payments over an extended period, typically 30 years. Each payment increases slightly each year to account for inflation and provide growing income.
The lump sum option provides the cash value of the jackpot in one payment, typically about 60% of the advertised amount. The annuity provides the full advertised amount over 30 years with increasing payments.
Colorado Lottery annuities are structured as graduated payments over 30 years. Each payment is approximately 5% larger than the previous year's payment, helping to offset inflation over time.
| Factor | Annuity Option | Lump Sum Option |
|---|---|---|
| Total Amount Received | Full advertised jackpot | ~60% of advertised jackpot |
| Payment Structure | 30 annual payments | Single payment |
| Tax Management | Taxes paid annually on each payment | All taxes paid in year of winning |
| Financial Discipline | Forced savings and budgeting | Requires self-discipline |
| Investment Control | Limited to annuity investments | Full control over investments |
Understanding the tax obligations of lottery winnings in Colorado
Lottery winnings are subject to federal income tax at the highest marginal rate. The IRS requires withholding of 24% upfront, but the actual tax liability may be higher depending on your total income.
Colorado imposes a flat state income tax rate on all lottery winnings. This is in addition to federal taxes and applies to both lump sum and annuity payments.
Explore the various games offered by the Colorado Lottery
Starting Jackpot: $20 Million
Drawings: Monday, Wednesday, Saturday
Odds of Winning Jackpot: 1 in 292.2 million
Powerball offers multi-state jackpots that can grow to hundreds of millions. Colorado has had several Powerball jackpot winners.
Starting Jackpot: $20 Million
Drawings: Tuesday, Friday
Odds of Winning Jackpot: 1 in 302.6 million
Mega Millions is another multi-state game with massive jackpots. Colorado players have won several secondary prizes.
Starting Jackpot: $1 Million
Drawings: Wednesday, Saturday
Odds of Winning Jackpot: 1 in 3.8 million
Colorado's own jackpot game with better odds than national games. Jackpots roll until won.
Essential steps to take when planning your financial future after a lottery win
Answers to common questions about the Colorado Lottery
You must be 18 years or older to purchase and redeem Colorado Lottery tickets.
Colorado Lottery proceeds fund parks, outdoor recreation, conservation, and open space through Great Outdoors Colorado (GOCO), Colorado Parks and Wildlife, and the Conservation Trust Fund.
You have 180 days from the drawing date to claim draw game prizes and 180 days from the official end of game date to claim scratch game prizes.
The lump sum is the cash value of the jackpot paid at once (typically about 60% of the advertised amount). The annuity pays the full advertised amount in 30 annual payments that increase each year.
Federal tax is 24% withholding initially, but you may owe up to 37% depending on your total income. Colorado state tax is 4.55%. Consult with a tax professional for advice specific to your situation.
Yes, Colorado allows winners to remain anonymous by claiming prizes through a trust, LLC, or other legal entity. Consult with an attorney to set up the appropriate structure.
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