The gap between the top 1% of earners and average Americans is stark. In fact, the average American household earns a median income of under $70,000, but in some places, the top 1% can earn as much as $955,000. Those annual earnings can seem far out of reach in a country where less than 10% of all households earn more than $200,000, according to the U.S. Census Bureau. Ultimately, climbing the economic ladder is difficult, but it’s less intimidating in some states than in others.
SmartAsset analyzed data to determine the minimum income required to be among the top 1% of earners in each state. To do so, we used data from the IRS and Bureau of Labor Statistics. For more information on our sources and how we ranked states, read our Data and Methodology section below.
This is SmartAsset’s second study on what it takes to be in the top 1% in each state. Check out the previous edition here.
- New Jersey overtakes New York. New York ranked No. 3 in last year’s edition, with residents needing $777,126 to be a top 1% taxpayer, while New Jersey followed with $760,462. This year, New Jersey outpaces New York’s top 1% by $8,168.
- In this one state, you’ll need to earn more than $900,000 to be in the top 1%. That state is Connecticut. The top 1% of taxpayers here have the highest average tax burden (27.77%). Residents in the next highest state need roughly $58,300 less to be a top 1% taxpayer.
- Roughly $374,700 will put you in the top 1% in West Virginia – the lowest threshold across the country. Mississippi follows, where taxpayers will need roughly $383,100 to be a top 1% taxpayer. There are just 11 additional states that require less than $500,000 to be in the top 1%.
States Where the 1% Income Threshold Is Highest
The Constitution State takes the No. 1 spot once again. Here, residents would need to earn roughly $955,000 to be in the top 1% of taxpayers. That makes it the only state requiring more than $900,000. Connecticut residents need to earn at least $336,800 to fall into the top 5%. Both groups have a tax burden that exceeds 24%, with the top 1% seeing a rate of 27.77% on average.
Residents in Massachusetts need to earn just under $900,000 to be in the top 1% of taxpayers. This group accounts for roughly 38.12% of all income taxes paid in the state and is typically taxed at a rate of 26.46%. The income cutoff for falling into the top 5% is $547,000 less than the top 1% cutoff.
3. New Jersey
The threshold to be a top 1% taxpayer in the Garden State is $825,965. For the top 5%, the lower limit sits at $338,884. New Jersey residents within the top 5% account for 55.60% of the state’s income taxes, with the top 1% making up 33.58%.
4. New York
New York residents earning over $817,796 are considered top 1% taxpayers, while the threshold for the top 5% is much lower at $287,752. The top 1% of taxpayers in the Empire State are taxed at an average rate of 27.48%, which is the second-highest across the country. This group also accounts for 45.59% of the entire state’s total income taxes (fourth-highest).
The most populous state in the country has the fifth-highest threshold to be a top 1% taxpayer ($805,519, which is also the last state to exceed $800,000). California residents earning beyond this threshold are taxed at an average rate of 26.78% (fifth-highest) and account for roughly 39% of total income tax in the state. To be a top 5% taxpayer in the Golden State, a resident would need to earn almost $317,800.
States Where the 1% Income Threshold Is Lowest
1. West Virginia
As it did last year, West Virginia takes the top spot for the lowest threshold needed to be a top 1% taxpayer: $374,712. The difference between the top 1% and top 5% in West Virginia is roughly $190,700. The average tax rate for the top 1% is 23.56%, and these residents account for 27.49% of the state's total income taxes. Comparatively, the top 5% pays an average tax rate of 18.45% and accounts for 48.03% of West Virginia's total income taxes.
To be a top 1% taxpayer in this southern state, residents must earn at least $383,128. Additionally, Mississippi and West Virginia are the only two states where you need to earn less than $400,000 to be in the top 1% of taxpayers. For this group of taxpayers, there is an average tax rate of 22.47% and they account for just under a third of the state’s total income taxes.
3. New Mexico
New Mexico taxpayers in the top 1% account for roughly 33% of total income taxes in the state. To meet the threshold for the top 1%, a New Mexico resident needs at least $418,970 in earnings and can expect to be taxed at an average rate of 22.67%. The top 5% needs a minimum of $201,646 and pays an average tax rate of 18.86%
In the state known for diamonds, residents will need to earn at least $446,276 to fall into the top 1% of taxpayers. Those earning over $198,233 fall into the top 5%, almost a 56% difference in earnings. The top 1% of taxpayers are taxed at an average rate of 22.57%, while the top 5% can expect roughly a 19% rate. Both groups account for 58.41% of the state’s total income taxes.
Earnings of just over $447,300 are needed to be considered a top 1% taxpayer in the Bluegrass State, and just under $200,000 is required to be in the top 5%. Kentucky residents who fall into the top 1% are taxed at an average rate of 23.78% and account for just under a third of the state’s total income taxes.
Data and Methodology
To determine the income needed to be in the top 1% of earners in each state, SmartAsset analyzed 2019 data from the IRS for tax units (i.e. single, married or head of household). Figures were adjusted to 2022 dollars using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the Bureau of Labor Statistics.
Tips for Financial Planning
- Learn how to maximize your tax breaks. Tax season is fast approaching. Make sure you’re prepared and the whole process will be far less daunting. Here are some of the most popular tax breaks you can potentially use on your tax return.
- Get a sense for what your taxes might look like this year. SmartAsset's federal income tax calculator can help you estimate your taxes before the filing deadline.
- Work with a finance professional. Whether you’re in the top 1%, top 5% or below, you should plan ahead for retirement. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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