Yahoo Finance 20 Most Tax-Friendly Places for Wealthy Families
Tax loopholes. Tax shelters. Tax write-offs. These are just a few of the strategies that many people assume the rich use to avoid paying taxes.
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Without a doubt, there are plenty of wealthy Americans who use tax laws to their advantage to reduce the amount they have to pay. But that doesn't mean they're escaping taxes entirely. In fact, a millionaire's tax surcharge is added to families who earn $1 million or more annually in a handful of states, according to the Tax Foundation.
And with a top federal income tax rate of 37%, it's no wonder high-income adults look for ways to lower their tax bills. After all, one way to grow your wealth is to reduce the amount of wealth you have to hand over to Uncle Sam.
To do that, wealthy families can enlist the aid of a good accountant who can help navigate tax laws to their advantage. They also can be smart about where they choose to live. That's right - you can pay less in taxes simply by choosing the right city and state to call home.
In a new study, GOBankingRates sought to find places that are more tax-friendly for wealthy families. It analyzed 499 U.S. cities with populations greater than 75,000 using eight criteria:
Top marginal state income tax rate
Total state and local taxes as a share of family incomes for the top 5%
Total state and local taxes as a share of family incomes for the top 1%
Typical home value for top tier homes.
Percentage of households earning $150,000 or more
Violent crime and property crime rates per 1,000 residents
School district quality
The cities were then ranked, with No. 20 being a good option for wealthy families and No. 1 being the best.
GOBankingRates found that a majority of the most tax-friendly cities are in states that don't have a state income tax. What makes them appealing to families are their low crime rates and good schools.
20. Carrollton, Texas
Population: 131,288
Tax rate: 0.00%
Total state and local taxes for top 5% of families: 22.32%
Total state and local taxes for top 1% of families: 25.83%
Median price for a top-tier home: $529,983
Percentage of households earning $150,000 or more: 21.2%
Violent crime rate per 1,000 residents: 1.64
Property crime rate per 1,000 residents: 14.56
School district grade: B+
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19. Naperville, Illinois
Population: 149,013
Tax rate: 4.95%
Total state and local taxes for top 5% of families: 22.81%
Total state and local taxes for top 1% of families: 26.35%
Median price for a top-tier home: $658,917
Percentage of households earning $150,000 or more: 45.2%
Violent crime rate per 1,000 residents: 0.61
Property crime rate per 1,000 residents: 3.20
School district grade: A+
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18. Midland, Texas
Population: 130,765
Tax rate: 0.00%
Total state and local taxes for top 5% of families: 22.32%
Total state and local taxes for top 1% of families: 25.83%
Median price for a top-tier home: $425,835
Percentage of households earning $150,000 or more: 24.4%
Violent crime rate per 1,000 residents: 4.56
Property crime rate per 1,000 residents: 17.28
School district grade: C
17. Gilbert, Arizona
Population: 262,249
Tax rate: 2.50%
Total state and local taxes for top 5% of families: 21.38%
Total state and local taxes for top 1% of families: 25.22%
Median price for a top-tier home: $720,981
Percentage of households earning $150,000 or more: 29.1%
Violent crime rate per 1,000 residents: 1.19
Property crime rate per 1,000 residents: 10.71
School district grade: A
16. Troy, Michigan
Population: 86,912
Tax rate: 4.25%
Total state and local taxes for top 5% of families: 20.92%
Total state and local taxes for top 1% of families: 25.01%
Median price for a top-tier home: $538,569
Percentage of households earning $150,000 or more: 32.2%
Violent crime rate per 1,000 residents: 1.21
Property crime rate per 1,000 residents: 10.19
School district grade: A+
15. Sioux Falls, South Dakota
Population: 189,258
Tax rate: 0.00%
Total state and local taxes for top 5% of families: 20.16%
Total state and local taxes for top 1% of families: 22.99%
Median price for a top-tier home: $452,314
Percentage of households earning $150,000 or more: 11.9%
Violent crime rate per 1,000 residents: 5.25
Property crime rate per 1,000 residents: 28.21
School district grade: A-
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14. Johns Creek, Georgia
Population: 82,068
Tax rate: 5.75%
Total state and local taxes for top 5% of families: 21.34%
Total state and local taxes for top 1% of families: 25.06%
Median price for a top-tier home: $856,239
Percentage of households earning $150,000 or more: 44.8%
Violent crime rate per 1,000 residents: 0.35
Property crime rate per 1,000 residents: 4.58
School district grade: A-
13. Rochester Hills, Michigan
Population: 75,990
Tax rate: 4.25%
Total state and local taxes for top 5% of families: 20.92%
Total state and local taxes for top 1% of families: 20.01%
Median price for a top-tier home: $524,442
Percentage of households earning $150,000 or more: 31.4%
Violent crime rate per 1,000 residents: 0.67
Property crime rate per 1,000 residents: 5.55
School district grade: A+
12. Edmond, Oklahoma
Population: 93,522
Tax rate: 4.75%
Total state and local taxes for top 5% of families: 19.43%
Total state and local taxes for top 1% of families: 23.68%
Median price for a top-tier home: $503,370
Percentage of households earning $150,000 or more: 26.9%
Violent crime rate per 1,000 residents: 1.42
Property crime rate per 1,000 residents:15.22
School district grade: A+
11. Plano, Texas
Population: 282,181
Tax rate: 0.00%
Total state and local taxes for top 5% of families: 22.32%
Total state and local taxes for top 1% of families: 25.83%
Median price for a top-tier home: $673,863
Percentage of households earning $150,000 or more: 30.1%
Violent crime rate per 1,000 residents: 1.61
Property crime rate per 1,000 residents: 16.69
School district grade: A+
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10. Franklin, Tennessee
Population: 81,531
Tax rate: 0.00%
Total state and local taxes for top 5% of families: 21.25%
Total state and local taxes for top 1% of families: 25.12%
Median price for a top-tier home: $1,256,520
Percentage of households earning $150,000 or more: 30.6%
Violent crime rate per 1,000 residents: 1.7
Property crime rate per 1,000 residents: 7.87
School district grade: A
9. McKinney, Texas
Population: 189,349
Tax rate: 0.00%
Total state and local taxes for top 5% of families: 22.32%
Total state and local taxes for top 1% of families: 25.83%
Median price for a top-tier home: $667,380
Percentage of households earning $150,000 or more: 32.0%
Violent crime rate per 1,000 residents: 1.37
Property crime rate per 1,000 residents: 9.54
School district grade: A
8. Pearland, Texas
Population: 122,609
Tax rate: 0.00%
Total state and local taxes for top 5% of families: 22.32%
Total state and local taxes for top 1% of families: 25.83%
Median price for a top-tier home: $458,510
Percentage of households earning $150,000 or more: 31.3%
Violent crime rate per 1,000 residents: 1.08
Property crime rate per 1,000 residents: 14.6
School district grade: B-
7. League City, Texas
Population: 111,847
Tax rate: 0.00%
Total state and local taxes for top 5% of families: 22.32%
Total state and local taxes for top 1% of families: 25.83%
Median price for a top-tier home: $470,426
Percentage of households earning $150,000 or more: 31.5%
Violent crime rate per 1,000 residents: 0.80
Property crime rate per 1,000 residents: 10.56
School district grade: A
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6. Allen, Texas
Population: 102,778
Tax rate: 0.00%
Total state and local taxes for top 5% of families: 22.32%
Total state and local taxes for top 1% of families: 25.83%
Median price for a top-tier home: $706,868
Percentage of households earning $150,000 or more: 37.0%
Violent crime rate per 1,000 residents: 1.04
Property crime rate per 1,000 residents: 9.22
School district grade: A+
5. Frisco, Texas
Population: 193,140
Tax rate: 0.00%
Total state and local taxes for top 5% of families: 22.32%
Total state and local taxes for top 1% of families: 25.83%
Median price for a top-tier home: $839,062
Percentage of households earning $150,000 or more: 43.4%
Violent crime rate per 1,000 residents: 1.01
Property crime rate per 1,000 residents: 9.55
School district grade: A+
4. Fishers, Indiana
Population: 97,154
Tax rate: 3.15%
Total state and local taxes for top 5% of families: 20.09%
Total state and local taxes for top 1% of families: 24.55%
Median price for a top-tier home: $556,668
Percentage of households earning $150,000 or more: 35.8%
Violent crime rate per 1,000 residents: 0.76
Property crime rate per 1,000 residents: 6.59
School district grade: A+
3. Sugar Land, Texas
Population: 110,272
Tax rate: 0.00%
Total state and local taxes for top 5% of families: 22.32%
Total state and local taxes for top 1% of families: 25.83%
Median price for a top-tier home: $621,602
Percentage of households earning $150,000 or more: 40.8%
Violent crime rate per 1,000 residents: 0.79
Property crime rate per 1,000 residents: 13.68
School district grade: A
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2. Carmel, Indiana
Population: 98,137
Tax rate: 3.15%
Total state and local taxes for top 5% of families: 20.09%
Total state and local taxes for top 1% of families: 24.55%
Median price for a top-tier home: $753,367
Percentage of households earning $150,000 or more: 40.4%
Violent crime rate per 1,000 residents: 0.50
Property crime rate per 1,000 residents: 6.73
School district grade: A+
1. Flower Mound, Texas
Population: 75,050
Tax rate: 0.00%
Total state and local taxes for top 5% of families: 22.32%
Total state and local taxes for top 1% of families: 25.83%
Median price for a top-tier home: $828,312
Percentage of households earning $150,000 or more: 48.0%
Violent crime rate per 1,000 residents: 0.72
Property crime rate per 1,000 residents: 0.63
School district grade: A
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Jake Arky contributed to the reporting of this article.
GOBankingRates determined the most tax-friendly places for wealthy families by analyzing 499 U.S. cities with
greater than 75,000 population and available data along the following criteria: (1) top state marginal individual
tax rate, sourced from Tax Foundation 2023 brackets; (2) average total state and local tax rate for the top 5% of
incomes, (3) average total state and local tax rate for the top 1% of incomes as sourced from 2020 Internal
Revenue Services data; (4) percentage of households earning $150,000 or more, sourced from the Census
Bureau's 2021 American Community Survey; and (5) typical home value for top tier homes, sourced from Zillow's
February 2023 index. According to Zillow, top-tier homes are homes that fall into the top third of home values
within a given region. Each factor was scored, summed up (with factor (5) being weighted double and factor (1)
weighted 1.5x) and then ranked. Once a top 50 was identified, GOBankingRates then added the factors: (6)
violent and (7) property crime rate per 1,000 residents, sourced from Neighborhood Scout; and (8) school district
quality, sourced from Niche.com's school district grading system. The top 50 places then had all eight factors
scored, summed up (with factor (5) being weighted double and factor (1) weighted 1.5x) and ranked into a top
20. All data was collected on and up to date as of March 29, 2023
This article originally appeared on GOBankingRates.com: 20 Most Tax-Friendly Places for Wealthy Families
