IRS Publication 5398Â – In the world of taxation and financial planning, understanding income distribution across the United States is crucial for individuals, policymakers, and economists alike. One key resource for this is IRS Publication 5398, which provides detailed insights into Adjusted Gross Income (AGI) percentiles by state. This article dives deep into the publication, explaining its significance, key data points, and how AGI percentiles vary across states based on Tax Year 2017 data. Whether you’re researching top 1% income thresholds by state or median AGI levels, this guide offers valuable, data-driven information to help you navigate U.S. income trends.
What Is Adjusted Gross Income (AGI)?
Adjusted Gross Income, or AGI, is a fundamental metric used by the IRS to determine an individual’s taxable income. It represents your total gross income minus specific deductions, such as contributions to retirement accounts, student loan interest, or alimony payments. AGI is calculated on Form 1040 and serves as the starting point for figuring out itemized deductions, tax credits, and overall tax liability.
AGI percentiles break down income distribution into segments, showing the minimum income required to fall into categories like the top 1%, top 5%, or median (50th percentile). These percentiles are especially useful for comparing economic disparities between states, influencing everything from state tax policies to real estate markets.
Overview of IRS Publication 5398
IRS Publication 5398, titled “Adjusted Gross Income Percentiles by State,” was released in March 2020 and focuses on Tax Year 2017 data. It draws from individual income tax returns (Form 1040) filed during Calendar Year 2018, providing a snapshot of income distribution across all 50 states and the District of Columbia. The data is compiled by the IRS’s Statistics of Income (SOI) Division and includes metrics like the number of returns, AGI floors for various percentiles, average tax rates, and sources of income.
While this publication highlights key findings for 2017, note that the IRS regularly updates AGI percentile data. For the most current information (up to Tax Year 2022 as of early 2026), visit the IRS SOI Tax Stats page on AGI percentile data by state. This article primarily analyzes the 2017 data from Publication 5398 and associated SOI resources for a focused, historical perspective.
Key Highlights from Tax Year 2017 AGI Data
For Tax Year 2017, the national AGI cutoff for the top 1% was $516,714, with an average AGI of $1,625,221 for this group. This means that to be in the wealthiest 1% of U.S. taxpayers, your AGI needed to exceed this threshold.
- Highest Top 1% Cutoffs: States like Connecticut ($793,101), the District of Columbia ($776,518), Massachusetts ($698,256), New York ($673,603), and New Jersey ($672,113) led the nation, reflecting higher costs of living and concentrations of high-income industries like finance and tech.
- Lowest Top 1% Cutoffs: West Virginia ($305,690), Mississippi ($312,738), New Mexico ($327,052), Kentucky ($361,972), and Arkansas ($362,320) had the lowest thresholds, often tied to regional economic factors.
- National Median (50th Percentile): The U.S. median AGI was $42,589, highlighting the income gap between the top earners and the average taxpayer.
- Other Insights: When adjusted for Regional Price Parities (RPPs), Hawaii had the lowest top 1% cutoff at $335,452, accounting for cost-of-living differences.
These figures underscore regional income inequalities, with coastal and urban states generally showing higher AGI thresholds.
AGI Percentiles by State: Detailed Breakdown
Below is a comprehensive table summarizing key AGI cutoff values for Tax Year 2017, based on descending cumulative percentiles. The data includes the top 1% (99th percentile), top 5% (95th), top 10% (90th), and top 50% (50th/median). Values are in dollars and represent the minimum AGI required to enter each group. This table is derived from IRS SOI data files associated with Publication 5398.
| State | Top 1% (99th Percentile) | Top 5% (95th Percentile) | Top 10% (90th Percentile) | Median (50th Percentile) |
|---|---|---|---|---|
| United States | 516,714 | 209,515 | 146,621 | 42,589 |
| Alabama | 373,989 | 168,065 | 123,463 | 36,513 |
| Alaska | 415,221 | 199,237 | 151,456 | 49,555 |
| Arizona | 430,298 | 188,181 | 134,372 | 39,639 |
| Arkansas | 362,320 | 161,468 | 117,194 | 35,428 |
| California | 632,321 | 249,616 | 170,144 | 44,666 |
| Colorado | 540,440 | 227,844 | 160,863 | 48,337 |
| Connecticut | 793,101 | 272,510 | 183,221 | 52,605 |
| Delaware | 422,084 | 194,896 | 144,266 | 45,095 |
| District of Columbia | 776,518 | 297,707 | 196,385 | 53,252 |
| Florida | 557,708 | 196,973 | 133,463 | 35,941 |
| Georgia | 481,227 | 198,547 | 138,197 | 37,765 |
| Hawaii | 397,511 | 186,504 | 138,931 | 45,205 |
| Idaho | 390,602 | 170,760 | 124,372 | 40,900 |
| Illinois | 535,799 | 217,100 | 153,471 | 45,757 |
| Indiana | 378,143 | 167,955 | 124,813 | 40,610 |
| Iowa | 385,667 | 176,560 | 132,159 | 46,465 |
| Kansas | 432,034 | 185,376 | 135,170 | 43,588 |
| Kentucky | 361,972 | 161,962 | 119,807 | 38,225 |
| Louisiana | 405,698 | 173,711 | 126,666 | 35,955 |
| Maine | 373,450 | 170,170 | 124,607 | 40,881 |
| Maryland | 510,163 | 232,189 | 170,289 | 50,966 |
| Massachusetts | 698,256 | 271,807 | 186,479 | 53,560 |
| Michigan | 417,331 | 183,476 | 133,913 | 40,638 |
| Minnesota | 500,911 | 212,145 | 152,694 | 50,266 |
| Mississippi | 312,738 | 147,743 | 109,642 | 32,034 |
| Missouri | 402,452 | 176,275 | 128,189 | 40,044 |
| Montana | 399,692 | 169,332 | 124,770 | 40,012 |
| Nebraska | 413,827 | 180,160 | 132,994 | 44,977 |
| Nevada | 449,984 | 177,299 | 126,870 | 38,742 |
| New Hampshire | 489,151 | 221,207 | 161,037 | 51,946 |
| New Jersey | 672,113 | 269,428 | 187,099 | 52,286 |
| New Mexico | 327,052 | 161,493 | 118,148 | 34,305 |
| New York | 673,603 | 231,419 | 157,779 | 43,648 |
| North Carolina | 435,265 | 188,794 | 133,066 | 38,609 |
| North Dakota | 443,296 | 187,905 | 140,513 | 49,288 |
| Ohio | 395,900 | 172,662 | 124,785 | 41,634 |
| Oklahoma | 407,032 | 172,392 | 124,773 | 38,832 |
| Oregon | 446,732 | 198,056 | 142,240 | 44,136 |
| Pennsylvania | 471,719 | 200,106 | 142,866 | 44,243 |
| Rhode Island | 438,521 | 194,141 | 142,616 | 44,135 |
| South Carolina | 398,672 | 175,555 | 126,816 | 37,325 |
| South Dakota | 436,805 | 174,740 | 127,606 | 44,196 |
| Tennessee | 423,333 | 175,337 | 124,421 | 37,774 |
| Texas | 528,049 | 209,115 | 144,514 | 40,022 |
| Utah | 449,860 | 187,594 | 136,678 | 46,660 |
| Vermont | 390,859 | 179,967 | 131,509 | 42,664 |
| Virginia | 507,287 | 235,739 | 170,260 | 49,192 |
| Washington | 561,606 | 237,942 | 167,303 | 51,775 |
| West Virginia | 305,690 | 149,596 | 114,010 | 36,376 |
| Wisconsin | 410,830 | 178,710 | 132,658 | 45,452 |
| Wyoming | 458,579 | 181,233 | 136,504 | 48,170 |
This table illustrates significant variations, with states like California and New York requiring much higher incomes to reach the top percentiles compared to states like Mississippi or West Virginia.
Analysis: Highest and Lowest Income States Based on AGI Percentiles
The data from IRS Publication 5398 reveals clear patterns in U.S. income distribution:
- High-Income States: Northeastern states (e.g., Connecticut, Massachusetts) and tech/finance hubs (e.g., California, New York) dominate the top 1% cutoffs. These areas benefit from high-paying jobs in sectors like technology, finance, and healthcare.
- Low-Income States: Southern and Appalachian states (e.g., West Virginia, Mississippi) have lower thresholds, often due to reliance on agriculture, manufacturing, or lower-wage industries.
- Median Income Trends: Median AGI ranges from around $32,000 in Mississippi to over $53,000 in Massachusetts, reflecting broader economic health and cost-of-living differences.
These disparities can inform decisions on relocation, business expansion, or policy reforms aimed at reducing income inequality.
How to Use AGI Percentile Data in Your Financial Planning?
AGI percentiles are more than just statistics—they can guide personal finance strategies. For instance:
- Tax Planning: Knowing your state’s income distribution helps estimate tax brackets and potential deductions.
- Investment Decisions: Higher AGI states may offer better opportunities in real estate or stocks but come with higher living costs.
- Policy Advocacy: Economists and lawmakers use this data to advocate for fairer tax systems or economic development initiatives.
For updated figures, check the IRS website for Tax Years beyond 2017, as income trends evolve with economic changes.
Conclusion
IRS Publication 5398 offers a vital window into Adjusted Gross Income percentiles by state for Tax Year 2017, highlighting the diverse economic landscape of the U.S. From the top 1% earners in Connecticut to median incomes in the South, this data underscores the importance of regional factors in income distribution. Stay informed by exploring the latest IRS SOI releases, and use these insights to make smarter financial choices. If you’re filing taxes or planning ahead, understanding AGI is key to optimizing your returns.