Top 12 States for Wealthy Taxpayers, as Defined by the IRS

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Definitions of “wealthy” vary from client to client and advisor to advisor. Most Americans think it takes a net worth of around $2 million to be wealthy, according to a Schwab survey.

The Internal Revenue Service defines wealthy individuals using the estate tax threshold, calling this group “top wealthholders.” In 2019, the most recent year for which data is available, the threshold was $11.4 million.

The latest figures available show that the number of taxpayers who looked rich to the IRS ranged from just 8 per 100,000 residents in West Virginia to more than 100 per 100,000 residents in two states.

See the accompanying gallery for a look at the 12 states with the highest number of top wealthholders per 100,000 residents.

What it means: The IRS wealth tables may provide some surprising clues about where people who need big life insurance policies and high-end planning services live, or at least what those taxpayers tell the IRS about where they live.

The numbers: The IRS publishes detailed statistics on wealthholders every three years. The agency gets the data by reviewing estate and generation-skipping transfer tax returnsne of the IRS tables gives information about top wealthholders by state of residence.

The IRS leaves the fields for two states, Alaska and Rhode Island, blank because because the top wealthholder counts there are so low that including the numbers could reveal information about specific taxpayers.

To adjust the numbers for state population size, we divided the IRS top wealthholder count estimates by the Census Bureau’s 2023 state population estimates, and then multiplied those results by 100,000 to express the figures in terms of number of top wealthholders per 100,000 residents.

It updates the minimum amount of gross assets to be included in the “top wealthholder” category to correspond with increases in the size of the estate tax exemption for an individual.

For the 2016 tables, for example, which reflected tax returns filed before the Tax Cuts and Jobs Act of 2017′s increase in the estate tax exemption took effect, the cutoff was $5.45 million. The 2024 estate tax exemption is $13.6 million.

One reason for some of the more surprising results could be problems with the methods the IRS uses to develop the estimates, and especially how those methods work for low-population states.

Another reason for surprising rankings could be tax planning strategies: Four of the top five states in the gallery (the ones without the Empire State Building in them) are known for not having state estate taxes or state inheritance taxes.

See the table below for top wealthholder data for all 50 states and the District of Columbia.

Credit: Adobe Stock) 

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