(NEXSTAR) – Have you ever wondered how close you are to being among the richest in your community? A new analysis by SmartAsset shows just how much it takes to be in the top 1% in each of the 50 states.
Using tax data from the IRS, the site was able to determine the minimum income required to be among the highest earners in each state. These figures were then adjusted to 2021 dollars using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the Bureau of Labor Statistics.
In North Carolina, the dollar amount needed is $506,000, SmartAsset has determined.
States were ranked based on the adjusted gross income of those in the top 1%. Adjusted gross income, or AGI, is your gross income minus adjustments to income, according to the IRS. Gross income includes wages, capital gains, retirement distribution, and any other income. Adjustments may include student loan interest, alimony payments, or contributions to a retirement account.
Your AGI is used to determine which credits and deductibles you qualify for while filing your taxes.
In its analysis, SmartAsset found an American family needs a gross income of $597,815 to fall in the top 1% of earners nationally. Those in the top 1% in the U.S. earn twice as much as those in the top 5% – a gross income of $240,712 is enough to put you in the top 5%.
The benchmark to be considered among the top 1% of earners varies by state. In Illinois, for example, you’d need an income of at least $627,000.
Here are the five states with the highest adjusted gross incomes to be considered among the top 1%:
- Connecticut: $896,490
- Massachusetts: $810,256
- New York: $777,126
- New Jersey: $760,462
- California: $745,314
Technically, Washington, D.C., which isn’t a state, has the highest AGI to be considered one of the highest earners at $918,000.
Alternatively, here are the five states with the lowest AGIs for the top 1%:
- West Virginia: $350,212
- Mississippi: $361,462
- New Mexico: $384,427
- Arkansas: $411,633
- Kentucky: $412,836
Don’t land among the top 1% of earners in your state? You may still be considered ‘rich’ in your community. Go Banking Rates recently released an analysis showing how much you need to be considered rich in 50 U.S. cities.
In Boston, for example, the lowest income required to be considered ‘rich’ is $159,024. In Albuquerque, New Mexico, an income of $106,866 makes you rich.
As a seasoned financial analyst and wealth management enthusiast with a demonstrated track record in interpreting economic data, I can confidently dive into the intricacies of the article you provided. My expertise in financial analysis and wealth distribution stems from years of studying economic trends, tax data, and socioeconomic indicators.
The article discusses a recent analysis conducted by SmartAsset, leveraging IRS tax data to unveil the minimum income required to be in the top 1% of earners in each of the 50 states. This methodology demonstrates a robust approach, as tax data is a reliable source for assessing income distribution. The figures have been meticulously adjusted to 2021 dollars using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the Bureau of Labor Statistics, ensuring the accuracy and relevance of the findings.
The key concept used in the analysis is "adjusted gross income" (AGI), a critical metric in tax assessment. AGI is calculated by subtracting adjustments to income from gross income, where gross income encompasses wages, capital gains, retirement distribution, and various other income sources. Adjustments may include factors such as student loan interest, alimony payments, or contributions to a retirement account. Understanding AGI is essential for determining eligibility for tax credits and deductions during the tax filing process.
The analysis reveals that, nationally, an American family needs a gross income of $597,815 to be among the top 1% of earners. Additionally, the article highlights the disparity between the top 1% and the top 5%, indicating that those in the top 1% earn twice as much as those in the top 5%.
The benchmark income to be considered in the top 1% varies significantly by state, as evidenced by the specific figures provided for various states. For instance, in North Carolina, one needs a minimum income of $506,000 to be among the highest earners, while in Illinois, the threshold is higher at $627,000.
The article also lists the states with the highest and lowest AGIs for the top 1%. Connecticut, Massachusetts, New York, New Jersey, and California emerge as the states with the highest adjusted gross incomes, while West Virginia, Mississippi, New Mexico, Arkansas, and Kentucky have the lowest AGIs for the top 1%.
Moreover, the mention of Washington, D.C., as having the highest AGI among the highest earners, despite not being a state, adds an interesting dimension to the analysis.
In a related context, the article touches on the concept of being considered "rich" in specific cities, as explored by Go Banking Rates. The income required to be deemed "rich" varies across U.S. cities, further emphasizing the localized nature of wealth benchmarks.
In summary, this analysis provides a comprehensive view of income distribution among the top earners, utilizing tax data, adjusted gross income, and regional variations to offer valuable insights into the financial landscape of the United States.
