By: Dr. Tamara Patzer
October 12, 2026
In Brief: A California filer needs close to $1 million of adjusted gross income to reach the top 1%, according to a 2026 estimate. This feature explains why published thresholds disagree, how one sale can lift an owner over the line for a year, and what a New Orleans tax attorney says owners should settle before that year arrives.
Ask a California business owner whether they count among the state’s top earners and the answer is usually no. The numbers are less certain than the answer. A 2026 estimate puts the adjusted gross income needed to reach the top 1% of California filers at roughly $987,000, though published estimates like this vary by source and methodology and should be read as a rough marker rather than a fixed line. Many owners will cross a line like that only once, in the year they sell something, and then drop back under it. New Orleans tax and estate attorney Todd M. Villarrubia built the opening chapter of his book, Entrepreneurial B.E.A.S.T. Mode™, around that blind spot.
What Income Does It Take to Be in the Top 1% in California?
Roughly $987,000 of adjusted gross income, by SmartAsset’s 2026 estimate1. That estimate is a projection, not an official figure, and for comparison, the same estimate puts several other states in a broadly similar range.
The figures apply to tax return filers, not to households or individual people, and they are projections. SmartAsset started with IRS return data from 2022 and moved it forward to 2026 using state personal income growth. Treat the result as a reasonable marker, not a bright line.
Why Do Published Top 1% Thresholds Disagree?
Because they measure different years and make different adjustments. The Tax Foundation’s analysis of IRS data for tax year 2023 found that a filer needed roughly $676,000 of adjusted gross income to land in the top 1% nationally, based on actual filed returns for that year2. A state-level projection carried forward to 2026 will run higher in an expensive state and lower in a cheaper one, and neither figure should be treated as precise.
The lesson for an owner is simple. Ask where a threshold came from and which year it describes before using it for anything.
Can a Single Event Put an Owner in the Top 1%?
Yes, and that is the part most owners miss. A year with a business sale, a property sale, a large bonus or a payout from a partnership can lift income far above a normal year. The household did not become wealthy overnight. It had one tall year.
Consider a hypothetical owner who normally takes home $300,000 and, in the year a building is sold, reports $2.4 million. That owner passes the estimated California line for twelve months, pays tax as someone who did, and is back below it the next year with a different balance sheet. The label changed for a year, but the planning questions it raises did not go away.
Villarrubia’s book describes the same pattern in plain terms. Wealth and income are different things, and he puts it in a single line: “Income is a flow; net worth is a stock.” An owner may have built the stock over twenty years and then see the flow spike in one tax year, and the tax rules treat that spike as the event.
Investment income adds a layer. The Net Investment Income Tax of 3.8 percent applies once modified adjusted gross income passes $200,000 for single filers or $250,000 for joint filers. An owner who has never thought about it can meet it for the first time on the largest return of their career.
When Should a California Owner Start Planning for That Year?
Long before it. Villarrubia’s chapter on the families he describes makes a point that applies to any founder with an eventual exit: “The most astute families don’t wait for a letter of intent; they engineer the outcome they want five to ten years before an exit.”
In practice, that means deciding, well ahead of any offer, how the company is held, who else in the family is involved, which advisers will work together and what the owner wants the money to do. Several tools for that work take time to set up and cannot be added in a hurry. He is also clear that planning is not a trick. He warns that “The wrong structure or a missed exemption can turn a lifetime of compounding into a government windfall instead of a family legacy.”
What Does the Federal Estate Tax Add for a California Owner?
The federal estate tax exempts $15,000,000 per person for deaths in 2026, the IRS says. A founder whose company, real estate and investments together pass that figure may have a taxable estate unless the plan changes the picture. A business is often the largest asset, and it is also the hardest to value and the hardest to turn into cash on short notice.
The exclusion is a federal number and it can change with future legislation. State rules differ and are not covered here. An owner should have a lawyer check the plan against current law on a schedule rather than once.
Why Does a Threshold Matter If I Am Far From It?
Because the habits matter more than the number. An owner who is well below the California line today may cross it in a single year because of a sale, a distribution or a large contract. The owner who has already built the habits, a clear structure, a team that talks and a calendar will handle that year calmly. The owner who has not will scramble. Planning in a quiet year is far cheaper than planning in a loud one. It also gives the family time to think about what the money is for, which is a question that is much harder to answer when a closing date is on the calendar and the advisers are rushing to finish before a deadline.
Common Questions
Is the top 1% line the same in every state? No1. The 2026 estimate runs from roughly $446,000 in West Virginia to roughly $1.15 million in Connecticut, with California at approximately $987,000; these are projections and should be treated as approximate.
Does crossing the line once make me wealthy? Not by itself. One high-income year and a lasting net worth are different things. The book argues that high income and high net worth, on their own, do not secure anyone’s future.
Should I act now or wait for an offer? Villarrubia’s view is that waiting for an offer is too late for much of the planning. Owners with a sale in view should speak with a licensed attorney and a tax professional before signing anything.
Sources
- SmartAsset, Income Needed to Be in the Top 1% in Every State (2026)
- Tax Foundation, Who Pays Federal Income Taxes? Tax Year 2023
- Internal Revenue Service, What’s New: Estate and Gift Tax
- Internal Revenue Service, Topic No. 559, Net Investment Income Tax
About the Author: Dr. Tamara Patzer is a publisher and former newspaper editor. She was on the staff of The Charlotte Sun when it was named a 2005 Pulitzer Prize finalist for its Hurricane Charley coverage.
About the Source: Todd M. Villarrubia is an attorney with an LL.M. in Taxation and a Juris Doctorate. He is an Accredited Estate Planner, a Board Certified Expert in Estate Planning and Administration, and a Fiduciary Investment Advisor Representative. He is the author of Entrepreneurial B.E.A.S.T. Mode™.
Wealth Planning Law Group, 101 W. Robert E. Lee Blvd., Ste 404, New Orleans, LA 70124.
Phone: 504-982-8207
Email: todd@lawealthplan.com
Website: Wealth Planning Law Group
Disclaimer: Attorney advertising. Sponsored feature written on behalf of Todd M. Villarrubia. This article is general information, not legal or tax advice, and reading it does not create an attorney-client relationship. Results vary. The content in this article is provided for general knowledge. It does not constitute legal advice, and readers should seek advice from qualified legal professionals regarding particular cases or situations.
