How Much Do the 1% Make? A Breakdown by State

The “top 1%” refers to a distinct group at the highest income levels, often discussed in economic disparity conversations. Understanding their income provides insight into wealth distribution. This article clarifies what it means to be in the top 1% by exploring income thresholds, diverse income sources, and how these figures vary across different regions.

Understanding the Top 1% Income Bracket

The “top 1%” refers to households reaching a specific income threshold, rather than individual earnings. This household-centric view offers a comprehensive look at economic power, as many high-income individuals are in multi-earner households. The national income threshold for the top 1% has increased over time. In 2024, a household generally needs at least $787,712 annually to be in this group. This figure is much higher than the median U.S. household income of approximately $75,000 in 2023.

This threshold is determined by analyzing data from sources like IRS tax returns and the Bureau of Labor Statistics. These agencies establish income percentiles. The income needed for the top 1% changes annually, influenced by economic factors such as wage growth, inflation, and market performance. For example, recent wage gains and a stock market surge contributed to a 20% increase in the national threshold from the previous year.

The Economic Policy Institute (EPI) indicates that wages for the top 1% have grown over several decades. Between 1979 and 2019, wages for this group grew by 160.3%, compared to 26% for the bottom 90%. This shows increasing income concentration at the highest levels. The top 1% of earners held 12.4% of all wages in 2023, up from 7.3% in 1979.

Sources of Income for the Top 1%

The top 1% have varied income streams beyond traditional wages and salaries. While high salaries from executive positions, specialized professions, or entertainment careers contribute, other income forms play a role. These include earnings from investments, business ownership, and passive income. The income composition for this group differs from other brackets, with a greater reliance on capital-based earnings.

A primary component of income for the top 1% is capital gains. These are profits from selling assets like stocks, bonds, real estate, or other investments. Capital gains are concentrated among high-income individuals; the top 1% received 45.3% of all capital gains between 2002 and 2021. Short-term capital gains (assets held less than a year) are taxed at ordinary income rates, up to 37%. Long-term capital gains (assets held over a year) face lower maximum rates of 20%.

Business income is another source for the top 1%, especially for owners of private businesses, partnerships, or S-corporations. This income comes from operational profits, often passed through directly to owners. Beyond active business involvement, passive income streams like stock dividends, interest from financial instruments, and rental income also contribute. The wealthiest Americans report qualified dividends, which are taxed at the same preferential rates as long-term capital gains.

Reliance on capital gains and business profits distinguishes the top 1% income profile. This structure means a portion of their income may not be subject to standard payroll taxes like Social Security and Medicare. The concentration of capital gains in the highest income brackets can result in a proportionally lower effective tax rate for some high-income groups.

Income Thresholds by State

The income needed for the top 1% varies across the United States, influenced by local economic conditions, cost of living, and industry concentrations. States with major financial centers or technology hubs have higher thresholds than those with less economic activity. This regional disparity means an income placing a household in the top 1% in one state might not even qualify it for the top 5% in another.

For instance, in 2024, Connecticut, Massachusetts, and California have the highest income thresholds, requiring over $1 million annually to join the top 1%. Connecticut leads with approximately $1,152,254, followed by Massachusetts at $1,113,662, and California at $1,035,673. These higher thresholds reflect high-paying industries, greater wealth concentration, and elevated living expenses. New York and New Jersey also have higher requirements, with New York’s threshold around $965,645 and New Jersey’s at $975,645.

Conversely, states with lower costs of living and different economic landscapes present lower entry points for the top 1%. In West Virginia, for example, the threshold is approximately $420,453, one of the lowest. Mississippi has a lower threshold at around $440,744. Major metropolitan areas and specific industries like technology, finance, or specialized professional services drive up average incomes and 1% thresholds in certain states. In contrast, states with economies reliant on sectors with lower average wages will have more accessible thresholds.