Tax Season 2024: These Are the Worst States for Millionaires
Billionaires in the U.S. pay just 0.5% of their income in taxes, according to a 2023 report from the EU Tax Observatory as reported by Reuters. That’s because the world’s ultra-wealthy understand how to best protect their income and assets from taxation.
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But many millionaires, with the highest marginal tax rate of 37% in the U.S., pay extensive state and federal taxes. If you have more than $1 million in income, moving to a state with lower state income tax rates in the higher brackets — or a state like Texas, with no state income tax at all — can help reduce your overall tax burden.
Kiplinger recently revealed the eight most expensive states for people with taxable income exceeding $1 million. But even if your earnings aren’t quite that high yet, you might want to steer clear of these states if you earn $250,000 or more.
Learn More: Top 7 Countries with Zero Income Tax
California
With the highest marginal tax rate at 14.4%, up from 13.3% last year, California continues to hold the title as the most expensive state for high earners.
Hawaii
Along with a high cost of living, overall, Hawaii also has a higher-than-average income tax rate. Hawaii’s income tax rate sits at 11% for the highest earners, which includes individual taxpayers earning $200,000, $300,000 for those filing head-of-household, and $400,000 for married couples, filing jointly.
New York
New York falls just behind Hawaii when it comes to income taxes on high earners. New York’s top income tax rate is 10.9%, but that only applies to taxpayers with income higher than $25 million. But if you’re earning just over $1 million, you might pay 6.85% or more.
New Jersey
Wealthy New Yorkers may not want to escape to neighboring New Jersey to avoid income taxes. New Jersey residents earning $1 million or more pay taxes at a marginal rate of 10.75%. If you earn more than $500,000, you’ll pay nearly 9%.
Washington, D.C.
Washington, D.C., collects taxes at a marginal rate of 10.75% for those who earn more than $1 million. But the nation’s capital also taxes the middle class at a relatively high rate. If you earn between $60,000 to $250,000, you’ll pay 8.5%. Considering a single adult needs $49,712 just to live comfortably in D.C., according to MIT’s Living Wage Calculator, it’s hard to escape high taxes in D.C.
Oregon
Oregon taxes the middle class and even those living just above poverty level at high rates. The top income bracket, for individuals with income exceeding $125,000, pays 9.9%. But even if you make just $10,200, you’ll be taxed at a rate of 8.75%. Oregon also has a cost-of-living 10% higher than the national average, according to RentCafe, making this Pacific Northwest state unaffordable for many people.
Minnesota
Minnesota also taxes the middle class as if they were millionaires. Individuals pay taxes at a rate of 9.85% for income exceeding $183,340. If you’re married filing separately, you’ll pay that high rate if your income exceeds $152,485.
If you’re considering relocating, think about state income tax ramifications now and in the future. If you have aspirations to achieve earnings in the mid-six-figures or even the millions, you may find your dollars don’t stretch as far in these states.
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This article originally appeared on GOBankingRates.com: Tax Season 2024: These Are the Worst States for Millionaires
