Your winnings are taxable, no matter what you choose. Then the Lottery estimates how much of a return there will be on the jackpot prize pool if it is invested in Treasury Bonds over 26 years. That annual return is the amount that a winner would receive each year for 26 years. As has been done since 1990, the Virginia Lottery advertises the estimated annuitized value of the jackpot. The annuitized value is the jackpot prize pool plus the estimated interest to be earned over 26 years.
All interest earned is paid to the winner.
This chart might help you understand the difference. When you choose Cash Option, you will get your share of the jackpot prize pool all at once. When you choose Annual Payout, you'll get your share of the advertised jackpot in 26 annual payments. The jackpot prize pool is the amount of money available to the Virginia Lottery to invest in U.S. Treasury Bonds over a 26 year period. The advertised jackpot is the estimated total amount of pre-tax winnings, plus interest, payable over that 26 year period.