When you think of wealthy young Americans and where they live, California and New York are often the first places that come to mind. But times are changing.
In fact, SmartAsset’s latest study shows that Americans with six-figure salaries are leaving these two hotspots in favor of lower-cost locations.
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California alone recently saw a net deduction of 24,670 top earners with an average adjusted gross income (AGI) of $1.3 million. In contrast, New York saw a net deduction of 12,040 top earners with an average AGI of $1.1 million.
However, the states where these wealthy Americans are moving have affordable housing and lower taxes, highlighting that the cost of living is a top priority for even the wealthiest Americans.
The SmartAsset study considered the most recent IRS data from the 2021-2022 tax year and used households with annual incomes of more than $200,000 as the threshold.
So where are these top earners headed – and why have they decided to pack their bags?
These two low-tax havens are the most sought-after
In five states in particular, wealthy Californians and New Yorkers are starting a new life – and two of these states are major low-tax havens.
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Florida: 29,771 Net inflow from high-income households
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Texas: 8,260 Net inflow from high-income households
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North Carolina: 5,792 Net inflow from high-income households
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South Carolina: 5,270 Net inflow from high-income households
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Arizona: 4,365 Net inflow from high-income households
While Florida is clearly the winner here, it’s no secret why it (and Texas) top the list—neither state imposes a state income tax.
This would be a welcome relief for New York residents, who face income tax rates of up to 10.9 percent (excluding federal and local taxes) for top earners.
Californians also face high income tax rates—the highest in the country—that can reach as high as 12.3%. (For those earning more than $1 million a year, the new top rate is a whopping 14.4%).
In addition, these tax-friendly states are particularly attractive for pensioners who want to avoid a significant reduction in their pension payments to the tax authorities.
Both federal states also offer plenty of sunshine and also rank high in the ranking of the best workplaces.
According to Zillow’s June 2024 figures, the real estate market is also more affordable in Florida and Texas, where median home sales prices are $385,000 and $342,167, respectively.
For comparison, the median home sale price in recent months was $746,667 in California and $450,000 in New York.
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Where else do wealthy Americans move?
Aside from the two low-tax havens mentioned above, the Carolinas are a popular destination for wealthy Americans fleeing California and New York.
As of June 2024, median home sale prices in North Carolina were a respectable $341,500, while in South Carolina they were $317,833. Mild weather, attractive urban centers, lower cost of living, and balmy beaches also provide a higher quality of life for many.
Arizona, on the other hand, is an attractive place to live for many Americans due to its warm climate, thriving economy and the introduction of a flat income tax rate of 2.50% in 2023.
With real estate prices and mortgage rates still high in the U.S., it might also be worth it for you to pack your bags and move to the same cheaper areas that attract wealthy Americans.
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This article is for informational purposes only and should not be construed as advice. It is provided without warranty of any kind.
