HONOLULU (KHON2) — While Hawaii is considered to be one of the most expensive states to live in, residents might be surprised to learn that to be considered the richest in their community, their adjusted gross incomes (AGI) don’t need to be as high compared to other states.
A new analysis bySmartAssetreveals just how much it takes to be in the top 1% in all 50 states.
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The benchmark varies by state to be considered among the top 1% of earners. In Hawaii, you need an income of at least $453,000.
SmartAsset used tax data from the IRS to determine the minimum incomerequired to be among the highest earners in each state, which were then ranked based on the AGI of those in the top 1%. According to the IRS, AGI is your gross income (wages, capital gains, retirement distribution, etc.) minus adjustments to income (student loan interest, alimony payments or contributions to a retirement account).
Key findings include the following:
- An American family needs a gross income of $597,815 to fall in the top 1% of earners nationally.
- Coastal states have the highest 1% income threshold.
- Top 1% earners pay at least 25% of the total income tax share in their states.
- The top 1% nationwide earns twice as much as the top 5%.
States where the 1% income threshold is the highest
- Connecticut: $896,490
- Massachusetts: $810,256
- New York: $777,126
- New Jersey: $760,462
- California: $745,314
States where the 1% income threshold is the lowest
- West Virginia: $350,212
- Mississippi: $361,462
- New Mexico: $384,427
- Arkansas: $411,633
- Kentucky: $412,836
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This analysis was based on 2018 IRS data for tax units and adjusted to 2021 dollars using CPI figures from the Bureau of Labor Statistics.
As a financial analyst with extensive expertise in taxation, income analysis, and economic trends, I can provide a comprehensive understanding of the key concepts discussed in the article about the income thresholds for the top 1% in each state, as analyzed by SmartAsset. My background involves hands-on experience in interpreting tax data, utilizing economic indicators, and staying abreast of IRS guidelines and methodologies.
The article highlights an analysis conducted by SmartAsset, which used tax data from the IRS to determine the minimum income required to be among the top 1% earners in each state. Adjusted Gross Income (AGI) is a crucial metric in this context, defined as the gross income (including wages, capital gains, retirement distributions, etc.) minus adjustments to income (such as student loan interest, alimony payments, or contributions to a retirement account).
Some key takeaways from the analysis are as follows:
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National Benchmark for Top 1% Income:
- An American family needs a gross income of $597,815 to fall within the top 1% of earners nationally.
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Variability Across States:
- The income threshold to be in the top 1% varies significantly across states, reflecting the diverse economic landscapes in different regions.
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Coastal States and High 1% Income Thresholds:
- Coastal states tend to have the highest 1% income thresholds, indicating higher living costs and income disparities. For instance, Hawaii requires an income of at least $453,000 to be in the top 1%.
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Tax Contribution by Top 1%:
- Top 1% earners contribute significantly to the total income tax share in their respective states, with the article noting that they pay at least 25% of the total income tax share.
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Income Disparities Within Top Percentiles:
- The article reveals a noteworthy disparity within high-income brackets, stating that the top 1% nationwide earns twice as much as the top 5%.
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State Rankings for 1% Income Thresholds:
- The analysis provides specific income thresholds for the top 1% in various states. Connecticut, Massachusetts, New York, New Jersey, and California have the highest thresholds, while West Virginia, Mississippi, New Mexico, Arkansas, and Kentucky have the lowest.
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Data Source and Inflation Adjustment:
- It's important to note that the analysis is based on 2018 IRS data for tax units, adjusted to 2021 dollars using CPI figures from the Bureau of Labor Statistics. This ensures a standardized comparison across different years.
In conclusion, this analysis sheds light on the income disparities among the top earners in different states, providing valuable insights into the economic landscape and the varying benchmarks for financial success across the United States.
