For households with annual incomes of more than $200,000, moving between states can have a significant financial impact, even though it represents a small portion of all tax returns filed that year. If a state loses more high-income taxpayers than it gains in a given year, tax revenues may decline and the state's fiscal position may deteriorate. That's why high-income household migration patterns continue to make headlines, even though they accounted for less than 7% of total tax returns filed in 50 states and the District of Columbia in 2020.
With this in mind, SmartAsset set out to identify the states with the highest migration of high-income households. To do this, we looked at the inflows and outflows of taxpayers who earned at least $200,000 in each state between 2019 and 2020. For more information on our data sources and how we put all the information together to create our final rankings, please see our Data and Methodology section. Section below.
Main findings
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Immigrants are most prevalent in Sunbelt states. Of the 10 states with the largest influx of high-income households, eight are located at least partially in the Sunbelt. This includes the top six states, starting with Florida.
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State income taxes play a role. There are nine states in the country that do not impose income taxes at the state level. Four of the states, Florida, Texas, Tennessee and Nevada, are among the 10 states with the highest net inflow of high-income households.
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Washington, D.C., has the highest percentage of high-income residents, while West Virginia has the lowest. Households earning at least $200,000 a year make up 12.19% of all taxpayers in the District of Columbia. The nation's capital is one of only four states, along with Connecticut, New Jersey, and Massachusetts, where high-income filers account for more than 10 percent of all tax returns. West Virginia, on the other hand, has the lowest percentage of filers filing $200,000 or more (2.96%).
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States that capture high-income households
No state is growing more high-income households than Florida, and it's not even close. Despite losing 11,756 tax filers who reported income of at least $200,000 in 2020, the Sunshine State added 32,019 high-income households that year. This means that the number of high-income filers has increased by 20,263.
Like Florida, the second-ranked state of Texas has no state income tax. Despite ranking second, the state's net migration of high-income households was about a quarter of Florida's in 2020. Specifically, the Lone Star State saw an increase of 18,417 filers making at least $200,000 and a decrease of 13,061.
Arizona, North Carolina, and South Carolina had net migration of 5,268, 4,713, and 3,967 households, respectively. Tennessee (+2,743), Colorado (+2,624), Nevada (+2,331), Idaho (+2,055), and Utah (+1,503) are the top 10 states with the highest net migration of high-income filers. concluded.
States losing high-income households
It's no wonder that most of the states with the highest net losses for households with incomes of $200,000 or more are traditionally considered high-tax states.
New York State saw a net exodus of nearly 20,000 high-income households in 2020, the most of any state surveyed. The Empire State gained 9,650 such households, but lost a whopping 29,562 in the same year. California wasn't far behind, losing a net 19,229 high-income filers.
Illinois, Massachusetts, and Virginia ranked third, fourth, and fifth in net outflows for high-income households in 2020, followed by New Jersey, Maryland, District of Columbia, Minnesota, and Ohio. The states followed.
However, the bottom 10 places on the list still have a higher percentage of households making more than $200,000. On average, high-income households account for 6.82% of all taxpayers nationwide, significantly lower than the average for the bottom 10 of the rankings (8.79%).
Data and methodology
To determine where high-income households are moving, we looked at data from all 50 states, not just the District of Columbia. We defined high-income households as those whose adjusted gross income was $200,000 or more. More specifically, we took a closer look at her two metrics:
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An influx of tax filers with incomes of $200,000 or more. This is the number of filers who moved to a state and had an adjusted gross income of at least $200,000. The data is from the IRS and is from 2019 to 2020.
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Outflow of taxpayers filing taxes of $200,000 or more. This is the number of filers who have an adjusted gross income of at least $200,000 and have moved out of state. The data is from the IRS and is from 2019 to 2020.
To rank states, we determined each state's net inflow of high-income households. This is the inflow minus the outflow. We then ranked the states in descending order according to their net inflows.
Tips for moving to another state
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Ask your financial advisor to help you with the transition. An advisor can help you sort out your finances and ensure your move goes smoothly. SmartAsset's free tool matches you with up to three financial advisors serving your area and allows you to meet with an advisor for free to decide which one is right for you. Masu. If you're ready to find an advisor who can help you reach your financial goals, get started today.
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Consider laws regarding estate planning and investment returns. Ryan Flanders, a certified financial analyst (CFA) in Bel Air, Maryland, said the most important things to consider when moving to a new state are state income taxes and cost of living. However, you should also keep in mind some less obvious points. “Inheritance tax and estate planning issues are unique to each state. When changing states, it is important to amend wills, powers of attorney, etc. with the correct wording. It is also important to understand how you may be taxed (or trusted) to make the necessary changes,” Flanders said. “Investment accounts for households with high net incomes often use municipal bonds and bond funds due to their tax nature.”
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We must also not forget the changes in the medical system. Jeremy Finger, CEO and founder of Riverbend Wealth Management in South Carolina, recommends checking with your health insurance company to see if your benefits will continue in your new location. “Private health insurance and Medicare Advantage plans for young retirees both have specific service areas,” said Finger, a certified financial planner. “Retirees who move outside of a service area may have to look for a new plan, which can result in higher premiums and higher out-of-pocket costs.”
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This article, “Where High-Income Households Are Moving – 2022 Survey” was first published on SmartAsset Blog.
