This State Is Attracting the Country's Highest Earners

If you earned over $200,000 a year, where would you live?

Data from the IRS shows us a lot about high earners in the United States, including where they live and where they are moving to and from. It shows, for example, that households earning $200,000 or more between 2019 and 2020 brought in about 40% of total U.S. income for 2020. We can also see that the number of high earners is increasing: There were 500,000 more returns from top-bracket earners in 2020 than the year before.

California continues to be home to more high earners than anywhere else in the country. However, the latest data shows that some are tiring of the Golden State and moving elsewhere. Between 2019 and 2020, over 36,500 high-income households moved away from California, while only 17,500 or so arrived there. Even so, 17% of the country's top income families still call California home.

High earners are moving to Florida

So where are they going? The state that attracted the most top earners was Florida. Around 32,000 households earning more than $200,000 moved to Florida between 2019 and 2020, while just under 12,000 left the Sunshine State. All in all, Florida gained over 20,000 high-income households, which the IRS estimates is around 47,000 individuals.

The Ascent research shows that typical house prices in Florida are slightly higher than the average, but not outlandishly so. The state also ranked third in The Ascent's analysis of best states to start a business last year. In addition to the sunny weather and beaches, the lack of state income tax is a draw.

The Tax Foundation says Florida is one of seven states with no state income tax, along with Alaska, Nevada, South Dakota, Tennessee, Texas, and Wyoming. Texas was another top gainer, attracting about another 5,000 new high-earning households, or 16,000 individuals.

Here are the five states that gained the most high-income households from 2019 to 2020, along with the overall percentage of U.S. high earning households living in that state.

The IRS categorizes those who've left the state as "outflow returns" and those who've arrived as "inflow returns." Subtracting one from the other gives us the net change.

Over 40% of the countries highest earners live in these five states

It's interesting to see where high earners are moving to, but if we zoom out and look at the states where the most high earners reside, it's a different picture. A quarter of the country's high earners live in California and Texas. States like Arizona and South Carolina may have attracted some more top earners, but they're still a long way down the list overall.

Many of the country's wealthiest people live in California. Indeed, Forbes 2022 Billionaires list shows that 186 live in California, which is more than any other state. New York has 135 billionaire residents and Texas has 67. A lot of that is due to Silicon Valley and the state's thriving technology industry. California may have some of the highest state taxes in the country, but that barely dents people's enthusiasm for living in the state.

The table below shows the top five states with the most high-earner residents as well as the net change in 2019 to 2020.

Bottom line

It's interesting to see that Texas was the second state on both lists, as two Texan cities also topped our list of the ten most affordable places to live in the United States. Both Cedar Park and Midland offered a good mix of low costs of living and high average earnings. It's also telling that so many high earners have moved to Florida, a state that doesn't charge state income tax. The nation's high earners are looking for places to live that won't break the bank.

No matter what income bracket you are in, this is worth considering. If you're looking for a drastic reduction in your living costs, moving could have a substantial impact on your bottom line. Just bear in mind that moving costs will eat into those savings. Moreover, the continued popularity of remote work makes relocation more of an option these days. We can't always choose where we live, but when it's possible, it can make a big difference to our bank accounts.