Wealthy People Are Moving to These States
Households making over $200,000 only file a small percentage of tax returns, but their relocation across states can have a significant financial impact. Losing more high-earning tax filers than it gains in a year might lower tax collections and exacerbate a state’s budgetary predicament. In 2020, high-earning households filed less than 7% of tax returns in the 50 states and DC, yet their movement patterns continue to create news.
With this in mind, SmartAsset identified the states with the most high-earning household migration. We studied the 2019–2020 influx and outflow of tax filers earning at least $200,000 in each state. Our data sources and how we ranked them are explained in the Data and Methodology section below.
Key Findings
Sun Belt states witness the most migration. Eight of the 10 states with the most high-earning households are in the Sun Belt. That covers the top six states, starting with Florida.
State income tax matters. Nine US states do not tax income. Four of the 10 states with the biggest net influx of high-income households are Florida, Texas, Tennessee, Nevada.
D.C. has the most high-earners, while West Virginia has the fewest. DC households earning above $200,000 make up 12.19% of tax filers. In Washington, Connecticut, New Jersey, and Massachusetts, high-income filers account for more than 10% of tax returns. West Virginia has the lowest percentage of filers earning $200,000+ (2.96%).
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States Gaining High-Earning Households
Florida has the most high-earning households by far. Florida increased 32,019 high-earning households in 2020 despite losing 11,756 individuals earning over $200,000. A net gain of 20,263 high-income taxpayers.
Like Florida, Texas, the No. 2 ranking place, does not have a state income tax. Although second, the state’s net migration of high-earning households was around a fourth of Florida’s in 2020. Texas added 18,417 filers earning over $200,000 and lost 13,061.
Arizona, North Carolina, and South Carolina follow with 5,268, 4713, and 3,967 high-earning household net migrations. Tennessee (+2,743), Colorado (+2,624), Nevada (+2,331), Idaho (+2,055), and Utah (+1,503) complete the top 10 states with the biggest net migrations of high-earning filers.
States Losing Wealthy Households
As expected, most states with the biggest net losses of households earning over $200,000 are high-tax states.
More than any state in our analysis, New York lost roughly 20,000 high-earning households in 2020. New York gained 9,650 such families but lost 29,562 in the same year. California followed, losing 19,229 high-earners.
In 2020, Illinois, Massachusetts, and Virginia had the third-, fourth-, and fifth-largest net outflows of high-earning households, followed by New Jersey, Maryland, DC, Minnesota, and Ohio
However, the 10 places at the bottom of our ranking still have a large percentage of households earning over $200,000. High-earning households account up 6.82% of all tax filers nationally, compared to 8.79% in the 10 places at the bottom of our rankings.
Data and Methodology
We examined data from all 50 states and DC to see where high-earning households are relocating. We considered high-earning households those with adjusted gross incomes over $200,000. We focused on two metrics:
Increase in $200,000+ tax payers. This number includes state-moving filers with adjusted gross earnings over $200,000. IRS 2019-2020 data.
Outflow of over $200,000 taxpayers. These are the state-exiting filers with adjusted gross earnings over $200,000. IRS 2019-2020 data.
To rank states, we calculated their net high-earning household inflow. Inflow minus outflow. Next, we sorted states by net intake in descending order.
Tips for Moving to Another State:
Use a financial advisor to move. An advisor can help you organize your finances, making your relocation easier. SmartAsset’s free service matches you with up to three local financial advisors, whom you can interview for free to choose one. Start looking for an advisor to help you reach your financial goals.
Consider investment income and estate planning laws. Bel Air, Maryland-based chartered financial analyst (CFA) Ryan Flanders stated, state income taxes and cost of living are the most essential factors when transferring. However, you must also consider certain less evident factors. Estate taxes and planning vary by state. When changing states, wills, powers of attorneys, etc. must be updated with the correct language. Flanders advised understanding how your new state may tax your estate (or trust) and making the required changes. “Investment accounts for higher-net-income families often make use of municipal bonds and bond funds due to their tax attributes.”
Remember, health care changes. South Carolina’s Riverbend Wealth Management CEO and founder, Jeremy Finger advises checking with your health insurance company to maintain benefits in your new area. Certified financial planner Finger said, “Both private health insurance for younger retirees and Medicare Advantage plans have specific service areas.” “Retirees leaving the service area will need a new plan, which could increase premiums and out-of-pocket costs.”
This article originally appeared on Yahoo Finance
