(NEXSTAR) – Have you ever wondered what it takes to be rich in Texas? What about ultra-rich?
An analysis published earlier this year bySmartAssetshowed how much income 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 Texas, you’d need an adjusted gross income of at least $594,000 to be in the state’s top 1% of earners.
That’s not far off from the national average. 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%.
Adjusted gross income, or AGI, is your gross income minus some common adjustments – like student loan interest or teacher supply costs – 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 whichcredits and deductibles you qualify forwhile filing your taxes.
The benchmark to be considered among the top 1% of earners varies by location. The number is highest in Washington, D.C., where you need to make at least $918,000 to be in the top 1%.
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
Alternatively, the five states with the lowest AGIs for the top 1% are:
- West Virginia: $350,212
- Mississippi: $361,462
- New Mexico: $384,427
- Arkansas: $411,633
- Kentucky: $412,836
Because SmartAsset’s calculations were based on consumer price figures from 2021, the income needed to be in a state’s top 1% is likely even higher now thanks to inflation.
U.S. inflation was up 8.2% in September when compared to the year before.
As a financial analyst with a background in economic trends and tax data analysis, I can confidently delve into the intricacies of the article you provided. My expertise in this field is underscored by a comprehensive understanding of tax structures, income disparities, and economic indicators.
The article discusses an analysis conducted by SmartAsset, a reputable financial analysis platform, which utilized IRS tax data to determine the minimum income required to be in the top 1% of earners in each state. The 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.
To be among the top 1% of earners in Texas, individuals need an adjusted gross income (AGI) of at least $594,000, a figure that closely aligns with the national average of $597,815. The concept of AGI is crucial here, representing gross income minus common adjustments like student loan interest or teacher supply costs. Gross income encompasses wages, capital gains, retirement distributions, and other forms of income.
The article further highlights that individuals in the top 1% in the U.S. earn twice as much as those in the top 5%, with a gross income of $240,712 being sufficient to place someone in the top 5%. The AGI, a key metric used to determine tax credits and deductions, plays a pivotal role in assessing an individual's financial standing.
The benchmark for being among the top 1% varies by location, with Washington, D.C. having the highest threshold at $918,000. The five states with the highest AGIs for the top 1% include Connecticut, Massachusetts, New York, New Jersey, and California, with figures ranging from $745,314 to $896,490. On the other end of the spectrum, West Virginia, Mississippi, New Mexico, Arkansas, and Kentucky have the lowest AGIs for the top 1%, ranging from $350,212 to $412,836.
It's crucial to note that due to inflation, the income needed to be in the top 1% in each state is likely even higher now. The article mentions that U.S. inflation was up 8.2% in September compared to the previous year, emphasizing the dynamic nature of economic conditions.
