Hollywood and New York City probably come to mind when you think about the places with the most million-dollar earners.While location plays a part in how much money you earn, there are other factors that can help you reach millionaire status.Plenty of patient saving is most likely required. Many people seek professional advice from a financial advisor to help them make the best decisions about their finances.Below, we looked at the unique economic profiles of each state through IRS data to find the states with the most million-dollar earners.
Specifically, we looked at the total number of tax returns and compared that to the total number of tax returns which had an adjusted gross income of at least $1 million. That means we considered both single filers and married couples filing jointly for this analysis. Check out our data and methodology below to see where we got our data and how we put it together.
Key Findings
- U.S. millionaires abroad.Just under 1% of American taxpayers filing from abroad had an adjusted gross income of at least $1 million, according to our analysis. If we had ranked Americans abroad as a separate region for this study, it would have ranked first. In fact a taxpayer filing from abroad is about 50% more likely to be a millionaire than a taxpayer from first-ranked Connecticut.
- High-tax states.In general the states that top this list have high income tax rates. Sixof the top 10 states feature higher-than-average tax rates.
- The importance of the cost of living.Many of the states which rank high in this study have high costs of living. Take for example someone who earns $1 million a year and lives in San Francisco. She receives a job offer to move to Minneapolis and earn $900,000. Should she take the job? Going by just cost of living, the answer is yes. The cost of living in San Francisco is roughly 18% higher than it is in Minneapolis. That means someone earning $847,457 in Minneapolis has the equivalent purchasing power of someone earning $1 million in San Francisco.
1. Connecticut
The Constitution State takes the top spot. There were just under 11,500 tax returns filed by taxpayers in Connecticut with a gross income at or above $1 million. That means around 0.65% of all tax returns filed were filed by people with an adjusted gross income above $1 million.
In Connecticut, millionaires lose quite a bit of their earnings to income taxes. According to our data, a married couple earning a combined $1 millionwould pay $62,982 in Connecticut income taxes.
2. Washington, D.C.
The nation’s capital comes in just behind Connecticut in second place. This area had the second-lowest total number of millionaire taxpayers in our top 10. However due to a low overall population, it had a high concentration of millionaires.
Overall about 0.59% of tax returns in this state were filed by people with an adjusted gross income above $1 million.
3. New York
The Empire State comes in third. Connecticut’s neighbor to the west has the second-most millionaires overall. In total there were 50,080 tax returns filed by people with a gross adjusted income of at least $1 million. Only sixth-ranked California had more. In total 9,614,610 tax returns were filed in New York, according to IRS data, meaning 0.52% were filed by millionaires.
A couple with a combined income of $1 million in the state of New York pays an effective state income tax rate of 6.57%. If they live in New York City, they have to deal with a further effective tax rate of 3.67%. In total, we estimate a couple taking home $1 million could expect to pay $439,191 in income taxes.
4. Massachusetts
Another high-tax Northeastern state takes fourth. There were around 16,000 tax returns filed in Massachusetts by taxpayers with an adjusted gross income above $1 million. That is equal to about 0.47% of all tax filers.
Massachusetts has a flat income tax rate, a good sign for millionaires. However, it is the second-highest flat state income tax in the country, at 5.1%. For millionaires who bought a home in Massachusetts, the state has an average effective property tax rate of 1.15%.
5. New Jersey
The Garden State comes in fifth. Like Connecticut, this state likely benefits from its proximity to New York City. Residents who live in New Jersey pay steep state taxes. Married filers taking home $1 millioncan expect to pay $72,134 in taxes to the New Jersey state government.
In total, 19,580 New Jersey tax filers took home an income of at least $1 million, equal to about 0.45% of all tax filers.
6. California
No state has more millionaires than California, which perhaps makes sense giventhat it’s the most populated state. There are just under 72,500 tax filers in California with an adjusted gross income above $1 million. Like residents in some other states in the top 10, such as Connecticut and New York, California residents face high income tax rates.
A couple taking home exactly $1 million in California would pay $94,731 to the California state government.
7. Florida
Florida is the first low-income-tax state to crack this top 10. This state would be a great place for a millionaire to retire. It has no state income tax. A couple filing jointly with an income of $1 million would pay only $364,089 in income taxes. In total around 0.34% out of the 9,627,280 tax filers in Florida took home at least $1 million.
8. Illinois
Illinois just edges out Wyoming and Texas for eighth. These three states’ scores are separated by just over 0.01%. Around 19,800 of the total 6,161,970 tax filers in Illinois took home an income of at least $1 million. That is equivalent to roughly 0.32%.
Like Massachusetts, Illinois has a flat income tax. The good news for Illinois residents, especially the millionaires, is that it is relatively low. A couple taking home $1 million could expect to pay $49,280 in state income tax.
9. Wyoming
The Cowboy State contains the ninth-highest concentration of millionaires in our study. According to IRS data, about 0.32% of all taxpayers in Wyoming took home $1 million or more. In raw numbers that is only 880 residents.
Wyoming might be the best state to live in for people who want to lower their tax burden. This state has no state income tax, the lowest sales tax of any state with a sales tax and the ninth-lowest average effective property tax rate in the country.
10. Texas
Our list ends in another low-income tax state. There are over 37,000 tax filers in Texaswith an adjusted gross income of at least $1 million. That means roughly 0.31% of filers took home at least $1 million in adjusted gross income. While Texas residents don’t have to pay state income tax, they do have to contend with some taxes, like a sales tax between 6.25% – 8.25% and property taxes that are among the highest in the nation.
Data and Methodology
For this study, we defined millionaire as an individual or couple who earned at least $1 million in adjusted gross annual income. In order to find the states with the most million-dollar earners, we looked at data for all 50 states and Washington D.C. Specifically we looked at the following two metrics:
- Total number of tax returns with an adjusted gross income of at least $1 million.
- Total number of tax returns.
Data for both metrics comes from the IRS and is for 2015.
We divided the number of tax returns filed by taxpayers with an adjusted gross income of at least $1 million and divided it by the total number of tax returns filed. Using this method we found the the percent of tax filers in each state who are million-dollar earners. We then ranked the states from highest to lowest using this number.
Tips for Saving More Money so You Can Increase Your Net Worth
- Afinancial advisorcan help optimize your tax strategy for your financial goals.SmartAsset’s free toolmatches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors who can help you achieve your financial goals,get started now.
- According to our investment calculator if you started today with $15,000 in an investment fund and contributed an additional $11,600 each year, you would end up with $1,003,227 after 30 years, assuming an average return of 6%. That means even if you are 35, with only $15,000 saved, you can become a millionaire before you retire.
- Saving can be hard. It’s important to have a budget that you can stick to. By having a budget you can see where your money is going and get an idea of where you could be cutting back your spending.
Questions about our study? Contact us at press@smartasset.com.
Photo credit: ©iStock.com/Eva-Katalin
Sure, I can dive into the concepts in the article and provide insight into each element mentioned there.
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Million-Dollar Earners: These individuals or couples have an adjusted gross income of at least $1 million. The article focuses on IRS data to analyze the concentration of such high earners across different states. This concept highlights how location, tax rates, and the cost of living affect the accumulation of wealth.
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Factors Impacting Income: The article emphasizes that while location matters in income accumulation, patient saving and financial planning play crucial roles. It mentions seeking professional advice from financial advisors to make informed decisions, indicating the significance of expert guidance in wealth management.
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IRS Data Analysis: The article uses IRS data to compare the total number of tax returns with an adjusted gross income of $1 million or more against the overall number of tax returns filed. This methodology helps in ranking states based on the percentage of million-dollar earners among taxpayers.
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Top States with Millionaires:
- Connecticut: Highest concentration of million-dollar earners, facing significant income taxes.
- Washington, D.C.: Second-highest concentration due to a smaller population.
- New York: High number of million-dollar earners with substantial tax rates, especially in NYC.
- Massachusetts: High earners facing a flat income tax rate and property taxes.
- New Jersey: Proximity to NYC affects the concentration of high earners, subject to steep state taxes.
- California: Highest number of million-dollar earners due to its high population, coupled with high income tax rates.
- Florida: A low-income-tax state, appealing for millionaires, with no state income tax.
- Illinois: Low flat income tax benefits millionaires, with a moderate concentration of high earners.
- Wyoming: A state with no income tax and lower property taxes, though a small number of million-dollar earners.
- Texas: A low-income tax state with a substantial number of million-dollar earners, despite other taxes like sales and property taxes.
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Cost of Living: The article also considers the cost of living as a crucial factor impacting millionaires' choices. It highlights how the cost of living differences between regions like San Francisco and Minneapolis can affect the purchasing power of the same income.
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Tips for Saving and Investment: The article offers financial advice, suggesting that smart saving habits, budgeting, and seeking advice from financial advisors can significantly impact wealth accumulation. Additionally, it provides insights into how regular investments can lead to millionaire status over time, citing an investment calculator's projections based on contributions and average returns.
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Contact and Photo Credit: It ends with contact information for inquiries and credits the photo used in the article.
Understanding these concepts underscores the interplay between location, tax structures, cost of living, financial planning, and saving habits in shaping the landscape of millionaire earners across different states.
