The story of 2 American economies
Joining the top 1% has become a byword for success, signifying that you're one of the few who has climbed to the top of the income ladder. But it's also become tougher to gain entry into this small group of Americans, given that it requires a lot more income in 2024 to qualify as one of them.
The U.S. threshold for joining the top 1% stands at $787,712 in 2024, a 20% increase from the roughly $652,000 required last year, according to a new analysisof IRS data from SmartAsset. By comparison, U.S. median annual income stands at about $75,000, SmartAsset said.
The higher amount likely reflects the impact of recent wage gains, which have lifted the earnings of everyone from low- to high-income workers, as well as the past year's surge in the stock market and other assets, which have especially boosted the fortunes of the rich, noted Jaclyn DeJohn, managing editor at SmartAsset and a certified financial planner. For instance, the S&P 500 has climbed about 20% over the last 12 months.
But becoming a top earner within your state can vary considerably by region, with some wealthier states like California and Connecticut requiring at least $1 million in annual income to make the cut. By comparison, poorer states such as West Virginia and Mississippi count the lowest thresholds, at about $420,000 and $440,000, respectively.
The 1% "is a very American concept — capitalism enables this pathway to really changing your position financially," DeJohn told CBS MoneyWatch. "It's definitely not easy, and one thing this data shows us is that it's getting harder."
Rich and richer
It's a lot easier to count among the nation's top 5% of earners, SmartAsset's data shows. For instance, the U.S. income threshold to join the top 5% is $290,185 — about one-third of the income needed to be a one-percenter.
"Definitely, the top 5% is much more obtainable," DeWood said. "The top 5% [income threshold] is good context for just how big of outliers the top 1% are."
Earning $200,000 annually "is generally the floor to be considered upper middle class," but it's also roughly the point at which the IRS phases out some tax benefits, such the Child Tax Credit, she noted.
For instance, single people earning $200,000 or married couples with combined incomes of more than $400,000 can't claim the full CTC, even if they have children under the age of 17.
Qualifying as part of the top 5% requires the highest annual income in Massachusetts, where the threshold is $393,160, followed by Washington state and New Jersey, at $377,265 and $372,171, respectively.
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
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