Determining the income threshold for the top 10 percent of earners in the United States depends on the data source and methodology used. There are a few approaches commonly used to define and calculate the income levels of the top income tier.
Income Distribution Data from the US Census Bureau
One approach is to use data from the US Census Bureau’s Current Population Survey (CPS) which provides annual income distribution data. The CPS surveys a representative sample of households asking a series of questions about income from various sources.
Based on the latest CPS data for 2022, the income threshold for the top 10% of households nationally is $233,895. This represents the minimum income required to be considered in the 90th percentile top income bracket. Households earning more than this amount are in the highest earning decile.
The CPS data shows that in order to be in the top 5% of earners nationally, household income needs to be at least $307,945. For the top 1% of earners, the income threshold is $569,076.
IRS Income Tax Data
Another source of data on high income earners comes from IRS tax statistics which provide breakdowns of filers by adjusted gross income (AGI) brackets. This data source looks specifically at AGI from tax returns rather than total household income.
Based on the latest complete IRS data for Tax Year 2020, the AGI threshold for the Top 10% of tax filers nationally was $174,625. The Top 5% AGI threshold was $241,039, while the Top 1% AGI threshold was $578,759.
| Income Percentile | AGI Threshold |
|---|---|
| Top 10% | $174,625 |
| Top 5% | $241,039 |
| Top 1% | $578,759 |
It’s worth noting the IRS income data represents tax filing units rather than households. The units could be individuals, couples, or families. Also, the IRS data looks specifically at AGI which can differ from total household income measured by the Census Bureau.
Cost of Living Differences by Location
It’s important to note that these national income thresholds may not reflect earning levels required to be considered “top 10 percent” in specific local areas and states. There are significant regional differences in the cost of living and income levels across the US.
For example, $233,895 only represents the 90th percentile threshold nationally. But to be in the top 10% of earners in high-cost states like California or New York, the income requirement could be well above the US average.
Likewise, the income needed to be in the top 10% in lower-cost Midwest or Southern states may be substantially lower than the national number.
Top 10% Income Thresholds by State
| State | 90th Percentile Income |
|---|---|
| California | $281,480 |
| Massachusetts | $250,333 |
| New York | $240,612 |
| Virginia | $225,722 |
| Texas | $200,926 |
This table shows the wide variation in top 10% income levels across a sample of states. California’s 90th percentile income is more than $280,000 while Texas’ is around $200,000. So the income required to be “top 10 percent” fluctuates greatly based on location and local costs.
Wealth Measurement Using Net Worth
Another way economists and researchers measure affluence and income level is by looking at net worth. An individual or household’s net worth is the total value of their assets minus liabilities.
While income looks at cash flows, net worth is a stock of wealth measurement. For high net worth individuals, much of their affluence may be from accumulated assets like businesses, real estate, investments, etc. rather than just income alone.
Data from the Federal Reserve’s Survey of Consumer Finances provides net worth figures across income percentiles. In 2019, the average net worth for households in the 90th to 100th percentiles was $2,534,600. This includes home equity and excludes defined benefit pensions.
So households at the bottom end of the top 10% by net worth have assets totaling over $2.5 million on average. The threshold rises significantly for the top 5% with average net worth of $4,638,100 and the top 1% at $16,785,400 average net worth.
Average and Median Net Worth by Income Percentiles
| Income Percentile | Average Net Worth | Median Net Worth |
|---|---|---|
| 90-100% | $2,534,600 | $1,167,400 |
| 95-100% | $4,638,100 | $2,370,500 |
| 99-100% | $16,785,400 | $8,272,700 |
This table displays the difference between average and median net worth. Median is often lower as average gets skewed higher by ultra-wealthy households.
Characteristics of Top 10% Households
In addition to high income and wealth levels, top decile households tend to have other distinguishing attributes:
- More likely to be dual-income married couples
- Hold advanced and professional degrees
- Disproportionately work in medicine, law, management, finance, and technology
- Older age with peak earning years in 40s, 50s, and 60s
- Concentrated in coastal regions and large metro areas
- Substantially higher savings and investment asset ownership
Many of these factors contribute to and reinforce the earning potential and wealth accumulation of households in the 90th percentile and above. Educational credentials, careers with high pay ceilings, and geographic location enable accumulation of income and assets.
Global Income Comparison
While $233,895 represents the national threshold for the top income decile, this earning level is well above global averages. According to Credit Suisse’s Global Wealth Report, the average worldwide income in 2022 was approximately $18,000 adjusted for purchasing power parity (PPP).
The PPP adjustment equalizes the purchasing power across countries by accounting for cost of living differences globally. So the top 10% income threshold nationally is well within the top 1% of global income earners.
Even the median US household income of around $70,000 is within the top 10% globally. This underscores the affluence and high standard of living relative to most of the world’s population.
| Income Percentile | Global Income Level (PPP) |
|---|---|
| 90-100% | $30,000+ |
| 50% (Median) | $2,500 |
| 10-20% | $700-$3,000 |
Only the top global income decile exceeds $30,000 annually. The median individual income globally is just $2,500. So those in the top 10% of US incomes are better off than around 90% of people worldwide.
Conclusion
There are a few common metrics used to determine thresholds for top incomes in the US. Nationally, Census data shows at least $233,895 in household income is needed to be in the top 10 percent. IRS data suggests $175,000 in individual AGI is around the Top 10 percent cutoff.
However, there is significant variation by geography due to cost of living differences. The income required to be a top earner is much higher in expensive urban regions like San Francisco or New York City.
Wealth, occupational prestige, location, and education level are also key attributes of households in the 90th income percentile and above. While top earning thresholds fluctuate based on methodology and data source, they universally represent incomes far exceeding most Americans and vastly above global middle class earnings.
