The Best States for High-Earners and Affluent Families
Ask the question, "which state is best for high-earners and affluent families?", and you will receive many, often contradictory answers. In the first place, the answer depends upon how the question is posed. That is, how are the terms “high-earners” and “affluent families” understood or defined? In the second, the answer depends upon the criteria and concerns deemed most relevant to individuals and families with incomes in the top decile, quintile, quartile, or even simply above the national average.
All too frequently, state income tax rates are the focus of attention, to the exclusion of numerous factors that are of equal, if not greater importance to individuals and families with incomes that fall into higher federal tax brackets. We decided to take an approach more nuanced than most: you won’t find us telling you to move to Wyoming simply because real estate is pricey and there is no state income tax. Instead, you will find in this study an approach that focuses on the concerns closest to the hearts and minds of high-earning individuals and families who are not, and will likely never be, members of the reviled one percent.
RewardExpert analyzed 20 metrics indicative of a state’s relative desirability and friendliness to high-earners, divided into six categories: 1) state income tax brackets, rates, deductions and exemptions, 2) state and local sales tax, 3) property taxes and assessment ratios (the percentage of the market value of a property that is subject to taxation), 4) current home values and historical trends, 5) public school quality, and finally, 6) public safety (specifically, property crime and robbery rates as reported in the FBI Crime in America Statistics).
Two Notes On Definitions and Income Taxes
- So as to ensure that this study is relevant and useful to as large a slice of the demographic pie as possible, we have purposely defined “high-earners” and “affluent families” to exclude incomes in and above the top 1 percent. While the balance of our analysis remains valid and applicable to top earners, we assumed individual or household incomes within the top 2 to 25 percent, using figures from the latest IRS statistical release.
- Our focus was on individuals earning approximately $100,000 to $250,000 per annum, and families with household incomes between $200,000 and $500,000. In short, wealthy enough to live the good life, but not so wealthy as to make public school quality irrelevant, or to make capital gains and alternative minimum taxes relevant and necessary for our analysis.
The Top Ten States for High-Earners
- High property values: $365,000 Zillow Home Value Index.
- Rapid and steady real estate appreciation: Property values up 8.26 percent in the past year, 5.03 percent in the past ten years. Highest value increase of any state over the past decade.
- Low property taxes: Taxable value of residential properties is only 7.62 percent.
- Low state sales tax: 2.9 percent. Average Local Sales Tax Rate: 4.62 percent.
- 15 percent sales and excise taxes on recreational marijuana helps keep other taxes low.
- No state income tax
- Low property taxes: 0.4 percent effective property tax rate. Property taxes assessed on only 35 percent of a property’s fair market value.
- No corporate income taxes
- To help support schools, state and local government services spend your money in-state whenever possible: Nevada’s state and local governments rely heavily on sales tax revenue to keep other taxes low or non-existent.
- A 15 percent excise tax and 10 percent retail sales tax on recently legalized recreational marijuana is projected to help sustain the low-tax status quo.
- Nevada public schools rank 13th in the nation.
- Flat, low state income tax: 4.25 percent of Federal Adjusted Gross Income
- Appreciating real estate values: Up 8.59 percent compared to this time last year, with current average home sales prices of $142,000.
- Only 50 percent of property’s fair market value is taxable, making for an effective property tax rate of 0.81 percent (versus the nominal average property tax rate of 1.62 percent).
- No local sales taxes. State sales tax rate: 6 percent
- No state income taxes
- Rebounding Home Values: Property values in Florida are up by 1.03 percent from early 2008, and up by 9.57 percent in the past year.
- At an average Zillow Home Value Index of $223,200, property values are recovering, and approaching pre-recession levels, which peaked at $258,000 in the third quarter of 2006.
- Low effective property tax rate of 0.82 percent due to generous homestead exemption amounts.
- Public schools ranked fourth-best In the U.S. with 171 gold and silver medal schools.
- Ranked fifth in the nation for public school quality, with 22 percent of public schools receiving recognition as gold or silver medal schools.
- While higher-earners pay a state income tax rate of 7.15 percent, Maine’s tax policy features one of the ten largest standard deductions for both single ($11,800) and married filers ($23,600).
- Appreciating real estate values: Home values have increased by almost two percent in the last decade, and almost eight percent in the last year.
- Low rate of crimes against property and robbery.
- Low state sales tax rate of 5.5 percent. No locality in Maine levies its own sales tax.
- Best schools in the U.S: 91 of the 354 public schools in Massachusetts have been recognized as gold or silver medal schools, or 25.70 percent of all public schools statewide.
- Flat income tax rate: contrary to popular opinion, Massachusetts has a flat state income tax of 5.1 percent that is below both the national median and average state income tax rates.
- No local sales taxes: while the state sales tax in Massachusetts is slightly above the national average at 6.25 percent, when local sales taxes are included for other states, sales tax in Massachusetts is below the national average.
- Until its neighbor, Maine, implements a legal market for recreational marijuana, Massachusetts has the lowest sales tax out of all states that have legalized recreational use: 10.75 percent.
- High and steadily appreciating property values: home values have grown by 2.43 percent over the past decade to an average of $394,000 (only California and Hawaii have higher valued real estate).
- Low state income tax rates: the top rates paid by Ohio taxpayers are 4.6 percent for individuals and families with incomes above $106,650 and below $213,500, above which the rate increases to a maximum of 5 percent,
- Low assessment ratio: owners of real estate in Ohio benefit from a statewide assessment ratio of 35 percent of fair market value.
- Low property tax rates: across Ohio, the average nominal property tax rate is 1.62 percent, which is reduced to an effective rate of 0.57 percent of the property value by the state-mandated assessment ratio.
- Appreciating, yet affordable real estate: average real estate prices in Ohio are higher than they have ever been, with appreciation keeping pace with the national average.
- No state or local sales taxes
- Flat-rate state income tax: the state income tax rate is the same for taxpayers of all income levels, a below average 5 percent.
- Ranked ninth for public schools, with 18.7 percent of public school systems in the state receiving recognition as gold or silver medal schools.
- Appreciating real estate values: New Hampshire real estate is significantly more valuable than the national average, by a margin of approximately $50,000.
- New Hampshire has the lowest incidence rate per capita of crimes against property, plus robbery.
- No state or local sales taxes: you can spend to your heart’s content without paying a dime in sales taxes.
- Public schools ranked tenth in the nation, with 18.4 percent of Delaware public schools receiving recognition as gold or silver medal schools.
- Low property assessment ratios in Kent & Sussex Counties, where taxes are assessed on only 50 percent, or 35 percent of market value.
- Low property tax rates, made lower in the lower two counties of the state: the average effective property tax rate in Delaware is a diminutive 0.86 percent.
- Modest top-bracket income tax rate of 6.6 percent, which kicks in at $60,000 Adjusted Gross Income, meaning affluent taxpayers pay the same rate as members of the middle-class with modest means.
- No state or local sales taxes: you can spend freely in Montana without paying a cent in sales tax.
- Appreciating real estate values: home values in Montana have never been higher, appreciating by 2.09 percent in the past decade.
- Modest top bracket income tax rate: 6.9 percent above $17,900 annually, for single and joint filers.
- Generous standard deduction and personal exemptions: Almost one standard deviation above the national median, $7,020 for individuals, and $16,480 for a married couple filing jointly, with one dependent.
- Property taxes are low, both in nominal and effective terms: the average nominal tax rate on real estate is 1.21 percent (below the national median rate of 1.32 percent), which is reduced by a generous homestead exemption to an effective rate of 0.82 percent (one hundredth of a percent below the national median—which includes states which, unlike Montana, assess taxes on a fraction of market value).
Premium Credit Cards for Elite Customers
If you travel with any frequency, you should consider getting a premium credit card. While the annual fees on these cards can be high, they will make your travels a lot more comfortable. In fact, if you use the perks and benefits that come with these cards, you can easily cover the cost of the fees. Let’s take a look at two of the best premium cards on the market.
Great for Airport Lounge Access and Elite Status
The American Express Platinum card is the original and in many ways still the best premium travel credit card. Without a doubt, it has the best airport lounge access.
You’ll get free access to the swanky Centurion Lounges that include complimentary locally inspired, celebrity chef-created foods and artisanal cocktails. Depending on the location, you might also have access to free spa treatments, showers, family rooms, wine tastings and more.
In addition, you’ll be able to get into Delta Sky Clubs when you fly Delta and any of the 1,000+ Priority Pass lounges around the world. There’s no better way to relax while waiting for your flight or making a connection.
The Platinum card does has a hefty $550 price tag, but that includes an annual $200 airline fee credit that can be used for bag fees, in-flight purchases and more. You’ll also get $200 in Uber credits every year and reimbursement for Global Entry or TSA PreCheck.
If you like to be treated right while you travel, you’ll appreciate the complimentary elite status you’ll get for a variety of hotels and rental car companies. You won’t get more perks with any other card.
The Best Value in a Premium Card
The Chase Sapphire Reserve may not have all the benefits of the Platinum card, but it still offers Priority Pass lounge access and excellent value.
To start with, the card includes an annual $300 travel credit that can be used toward any travel expenses, including airfare, hotels, rental cars and more. That credit is easy to use and brings down the net cost of the card to just $150 a year ($450 annual fee minus the $300 travel credit).
The 50,000-point sign-up bonus is worth at least $750 in travel since the card also offers a 50% bonus when redeeming points through the Chase travel portal. You can also transfer those points to a variety of hotel and airline travel partners if you prefer.
Add in Global Entry or TSA PreCheck fee reimbursement, triple points for travel purchases and car rental and hotel perks and this card is hard to beat for value.
It’s Time to Go Elite
While the annual fees are steep, premium credit cards offer fantastic value for those who appreciate the finer things in life while traveling. The complimentary airport lounge access, elite status with travel partners and free travel rewards can easily cover the cost of these cards and, perhaps more importantly, make your next vacation or business trip that much more comfortable.
RewardExpert analyzed data from federal, state, and local governmental sources, among others, to make a comprehensive assessment of the favorability of each state for high-earning individuals and affluent families, and to rank each state accordingly. We ranked each state on 16 metrics, assigning a score for each using a linear scaling method, where the highest or lowest value for each receives a score of 1 (or 100%) and the lowest, or highest, receives a score of 0 (depending on the nature of the metric, i.e. the highest tax rates would receive a score of 0, and the lowest, 1; whereas the highest ranking state on school quality would receive a 1, while the lowest would receive 0). For each of our six categories, we calculated an average score based on the scores assigned to each indicator.
States that do not exempt groceries from sales tax collection had their sales tax average score reduced by the sales tax rate applicable to grocery items, a 17th metric.
Finally, to obtain an overall score, and to rank the states accordingly, we calculated a weighted average of the scores received by each state in each of our six categories, 1) sales tax, 2) quality of life, 3) school quality, 4) real estate prices and trends, 5) property taxes, and 6) state income taxes. Quality of life, schools, and real estate were un-weighted, while income, sales, and property taxes were weighted proportionately to the percentage of total state revenues made up by each, which are the final three metrics of the 20 used in our study. Once our overall score was computed, ranking was a straightforward task.
Indicators & Sources
A. Sales Taxes
1.1 State Sales Tax
1.2 Average Local State Sales Tax
1.3 Tax Status of Grocery Items**
1.4 Sales Taxes as a Percentage of State Revenue*
B. Quality of Life
1.1 Property Crime Rate
1.2 Robbery Rate
C. School Quality
1.1 Number of Gold Medal Schools
1.2 Number of Silver Medal Schools
1.3 Percentage of Schools With Gold or Silver Medals
D. Real Estate Prices and Trends
1.1 Zillow Home Value Index (July 2018)
1.2 Year over Year Change in ZHVI
1.3 10-Year Change in ZHVI
E. Property Taxes & Assessment Ratios
1.1 Effective Property Tax Rate
1.2 Property Tax Assessment Ratio
1.3 Property Taxes as a Percentage of State Revenues*
F. State Income Taxes
1.1 State and Local Tax Deduction as Percentage of AGI
1.2 Individual Income Tax Rate at $250,000 per year
1.3 Married Couples Tax Rate at $500,000 per year
1.4 Standard Deductions and Personal Exemptions
1.5 State Income Taxes as a Percentage of State Revenues*
* Used for category weighting
** Modifier for sales tax score