The most exclusive zip code in America isn’t where you’d think it is.
It’s not in Connecticut’s Fairfield County - famous for being a haven for old-money WASPs and, increasingly, America’ nouveau riche. It’s not Berkeley or Palo Alto or some other piece of the Bay Area, where economic inequality is among the worst in the country.
Instead, it’s in South Florida, not far from Miami. The place is called Fisher Island, and with an average income of $2.5 million - beating the second-richest zip code by $1 million - it’s the wealthiest zip code in the country, according to recently released IRS data that was reviewed and analyzed by Bloomberg. The study included more than 22,000 eligible zip codes.
The average income in Fisher Island, zip code 33109, was $2.5 million in 2015, according to a Bloomberg analysis of 2015 Internal Revenue Service data. That’s $1 million more than the second-place spot, held by zip code 94027 in Silicon Valley, also known as the City of Atherton on the San Francisco Peninsula. The area’s neighbors include Stanford University and Menlo Park, home to Facebook and various tech companies. While the IRS data only provide the averages of tax returns, which can be skewed by outliers, Fisher Island is the only zip code in the Bloomberg analysis where more than half of all tax returns showed an income of over $200,000.
Fisher Island stands out for several reasons. For example, not only is it the highest earning zip code in the US, but it’s also an outlier in Bloomberg’s list because nearly all the other top spots are occupied by zip codes in the Greater New York metro area or the Bay Area. It’s also notable for its thematic consistency.
Typically high cost of living makes wealthy zip codes inaccessible to poorer individuals and families. But not only is this true of the zip code’s property values, it’s also true for another reason: Fisher Island is surrounded by water and it’s extremely difficult for outsiders to travel there.
Palm Beach (home of President Trump’s Mar-a-Lago club) and Naples were the only other two Florida zip codes that made the top 20. Meanwhile, certain suburbs of Seattle, Philadelphia, Chicago and Boston also ranked high on the list.
Many of the taxpayers living on Fisher Island were able to carve out more in itemized deductions from their tax bill than most Americans can affthan Taxpayers on Fisher Island also managed to carve out an average of $448,100 in itemized deductions last spring when they were settling up with Uncle Sam.
Still, Fisher Island’s deductions were smaller than the average deduction for high net worth individuals across the US - though BBG attributed this to the fact that Florida doesn’t have an income tax, so Fisher Island residents have less to deduct.
The zip code that took the most advantage of tax deductions in 2015 was 94301 in Palo Alto, California, where the average deduction was $491,600. Fisher Island had smaller average deductions relative to its income size than other zip codes and that’s likely because Florida has no income tax, so its residents can’t take deductions from that category. On the other hand, California has a top marginal income tax rate of 13.3 percent, the highest in the country.
But deductions for the very wealthy could look a lot different this year because of the new tax cut legislation, according to Falanga.
Deductions for state and local income tax have been curtailed to a maximum of $10,000. Before the new legislation, these deductions were unlimited. Limits on charitable contribution deductions have increased to 60 percent of gross income from 50 percent. That is just for cash contributions and does not include foundations, stocks, or artwork, which have different hurdles, said Falanga.
Of course, residents of wealthy zip codes across the US are about to take a financial hit from President Trump’s tax overhaul plan because many of these areas are situated in blue states with high local taxes. The Trump tax plan dramatically curtailed deductions for state and local taxes, imposing a cap of $10,000 when previously these deductions had been unlimited.
But here’s another advantage for Fisher Island is it’s in reliably low-tax Florida.
"I haven’t seen them change, but they have been curious about what’s going on," Falanga said. "And to a certain extent, some of them will be paying more."
But one thing is for certain: Whatever the impact is, it will be much less impactful than it will be for residents of other tony enclaves like - for example - Greenwich, Conn., where the tax law and shifting tastes are creating some of the most adverse market conditions since the financial crisis.
With that in mind, we wouldn’t be surprised to see an exodus of HNW snowbirds making the journey as a move to sunny Florida looks increasingly appealing by the day.