According to SmartAsset, an online publisher of consumer-focused financial information and advice for consumers, you need an annual income next year of just over $730,000 to belong to the infamous One-Percent Club if you live in Minnesota.
The 26,000 Minnesotans in the club are lucky. They’d need to earn seven figures to be in the top one percent in Connecticut, Massachusetts, and California, leaving a number of people falling into the top five percent club. A less prestigious standing as the threshold to be in the top 5%, one-twentieth of the population, is only $291,033 in Minnesota.
SmartAsset analyzed 2021 Internal Revenue Service (IRS) data for individual tax filers to determine the income needed by the top 1% of earners in each state. The numbers were adjusted to June 2024 dollars using the Bureau of Labor Statistics’ Consumer Price Index.
A report from the IRS, which some call the Infernal Revenue Service, shows 804,830 returns filed nationwide in 2023 that reported more than $1 million in income and roughly 88,000, bringing in over $5 million.
By comparison, the median reported household income in Cook and Lake County is around $74,000. Unlike the average, this means half of the households here earn less than $74,000.
Another figure the IRS tracks is the number of filers using itemized deductions and those using the standard deduction. In the same report of 2023 filings, only 9.5% of filers itemized their deductions. The remaining 90% used the standardized deduction, which is large enough for most taxpayers to avoid the hassle of keeping track of deductible receipts when preparing their returns. It also makes it far easier for the IRS to allow direct electronic tax filing, bypassing the hordes of online tax preparers.
Finally, as you look toward the New Year, we are reminded about your FICA deductions and self-employment tax. They’re the same thing. They are your premium payments for Social Security and Medicare.
If you have an employer, it withholds 7.65% of your gross pay, matches it with its funds to total 15.3%, and deposits that money with the IRS. If you’re self-employed, like small business owners and independent contractors, you pay the entire 15.3% yourself.
With much speculation about how to “save” Medicare and Social Security, it is essential to know that the government doesn’t require that everyone pay 15.3% of total income. Suppose one earns, either through a job or business, anything over $176,000 next year; they will pay zero percent on any income above that amount for the rest of the year. In other words, a person earning twice that threshold, $352,000, pays a FICA rate that is half what everyone earning less than $176,000 pays. And the more they make, the less percentage of their income pays FICA premiums. That’s why many people see eliminating that upper-end income to pay FICA as a way to ensure the financial viability of Medicare and Social Security.
