It may appear that it takes a lot to be among the top 1% of earners in the United States. That's mostly true, given that less than 10% of all American households earn more than $200,000, according to Census Bureau data. However, according to a new study, it may be easier to break into the top tier of earners than others.
SmartAsset calculated how much you'd need to earn to be among the highest earners in each state after reviewing available IRS tax data and adjusting it with the Labor Department's Consumer Price Index.
According to SmartAsset, the income threshold ranges from approximately $375,000 to slightly more than $955,000. Income thresholds to be in the top 1% were lower in states stretching from the Plains south to the Gulf region and east along the Rust Belt than in states along the coasts and into New England.
Connecticut has the highest threshold in the country, at around $955,000 per year. It was the only state with a minimum threshold above $900,000, with Massachusetts coming in second at around $897,000.
The following states have the highest income thresholds:
- Connecticut is $955,300
- Massachusetts is $896,900
- The amount in New Jersey is $825,965
- New York City is $817,796
- California is $805,519.00
“The most populous state in the country is California with the fifth-highest threshold to be a top 1% taxpayer ($805,519, which is also the last state to exceed $800,000),” the study displayed. “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 in the top 5% of taxpayers in California, a resident must earn nearly $317,800.
According to SmartAsset's findings, the state with the lowest threshold is West Virginia, where you need to earn around $374,700 to be in the top 1%. Mississippi came in second, with $383,100.
The following states have the lowest income thresholds:
- West Virginia: $374,712
- Mississippi: $383,128
- New Mexico: $418,970
- Arkansas: $446,276
- Kentucky: $447,300
If being in the top 1% of your state's residents seems out of reach, SmartAsset calculated how much you'd need to earn to be in the top 5% of each state.
While Connecticut has the highest threshold to enter the top 1%, it also has the third-highest threshold to enter the top 5%, at nearly $337,000. At $349,700, Massachusetts has the highest rate. Mississippi had the lowest threshold to be in the top 5%, at $181,100.
The full study's findings can be found here.
According to the Federal Reserve, the average net worth of an American household in 2019 was $748,800 (everything you own added up, minus any debt). However, the average is driven up by a smaller number of extremely wealthy people at the top of the spectrum. The median net worth, which provides a more accurate picture of the average American household, is at a lower price of $121,700.
According to federal data, the average American household earns around $70,000 per year.
