By Dr. Tamara Patzer
In brief: Most business owners assume the top 1% means private jets. The public data says the line is far lower, and crossing it brings tax and legal exposure many owners never plan for. This feature explains who counts, how much of the federal income tax the group pays, why income is not wealth, and what a 2026 estate tax exclusion of $15 million means for founders.
Ask a room of business owners whether they belong to the top tier of American earners, and most will laugh. The picture in their heads has a private jet in it. New Orleans tax and estate attorney Todd M. Villarrubia argues the real line is much closer than that, and that crossing it brings legal and tax exposure that many owners have never planned for. Here is what the public data says, and what his book, Entrepreneurial B.E.A.S.T. Mode™, makes of it.
What Income Does It Take To Be In The Top 1% Of U.S. Taxpayers?
For tax year 2023, the most recent year of IRS data available, a filer needed an adjusted gross income of about $676,000 to land in the top 1%, according to the Tax Foundation’s analysis of IRS data. That is a high income, but it is not a billionaire’s income. A founder who draws a salary, takes distributions, and sells a few assets in a good year can cross it.
Villarrubia opens his first chapter on exactly this point. “However, the reality is that the threshold for being in the ‘top 1% of America’ is lower than many believe.” He adds that the club does not require the trappings: “Membership doesn’t require a Gulfstream; it simply requires having built or accumulated significant financial power.”
The cutoff also moves. It differs by state and by year, and a single large sale can lift one household over the line for twelve months and then drop it back. Treat any published number as a snapshot.
How Much Of The Federal Income Tax Does The Top 1% Pay?
The top 1% of filers paid about 38.4 percent of all federal individual income taxes in tax year 20231. Whatever a reader thinks about that figure, it explains why tax planning is a standing line item for these households rather than a once-a-year chore.
Villarrubia is careful to say that the group is not uniform. In his book, he notes that effective rates vary with how income is earned, where a person lives, and what choices were made about timing. Someone paid mostly in wages and bonuses faces a different picture than a founder whose income arrives as long-term gains. The point is not that the group has one tax problem. It has several, and each depends on the facts.
Is A High Income The Same As Being Wealthy?
No. Income is what comes in during a year, and wealth is what remains. Villarrubia puts it in one line: “Income is a flow; net worth is a stock.” The Federal Reserve’s distributional accounts estimate that the top 1% held roughly $60.3 trillion in net worth in the second quarter of 2026, which shows how much of the country’s balance sheet sits with a small group.
The warning in his book runs the other way. A high salary does not protect anyone. In his words, “having a high income and high net worth in no way secures your future”, and he follows it with a plain instruction: you secure your future.
Why Do Many Founders In The Top 1% Not Feel Rich?
Because the money is usually locked inside the company. Villarrubia writes that “Most of their balance sheet is illiquid and concentrated in a single asset: their company.” Until a sale, a recapitalization or another liquidity event, that value exists on paper.
That mismatch creates a quiet risk. An owner can be comfortable on paper, short on spare cash, and exposed to a single lawsuit, a single customer, or a single bad year. The book lists the liquidity events that turn paper into money, including a public offering, an outright sale, a recapitalization, and a secondary sale, and argues that planning should happen before any of them, not after.
What Does The Federal Estate Tax Have To Do With It?
For people who die in 2026, the federal basic exclusion amount is $15,000,000 per person, according to the IRS. A founder whose company, real estate, and investments together exceed that figure has a taxable estate unless something changes the picture. A business valued at $40 million, for example, can push a family well past the exclusion even when the owner lives modestly.
The exclusion is a federal number. Other taxes and state rules can apply, and the amount can change with future legislation. Checking a plan on a schedule beats checking it once.
What Do Families That Keep Wealth Across Generations Do Differently?
They explain it to their children. Villarrubia observes that families who keep wealth share the reasons behind it, and the methods, with the next generation. He describes them as families that “treat wealth like a business, not a windfall, and view legacy as a mission, not an accident”.
In practice, he points to written governance, regular reviews, and early education for heirs, along with planning that is done before a sale rather than after it. None of that requires a specific dollar amount. It requires a decision to treat the family balance sheet as something that needs management.
Common Questions
Is The Top 1% By Income The Same Group As The Top 1% By Net Worth?
No, and the two sources above measure them differently. Income is measured on a tax return for one year. Net worth counts everything owned minus everything owed.
Does A Business Owner Need A Family Office?
Not always. Villarrubia writes in his book that not every family needs a full-service one. It depends on the number of entities, the number of states, and the stage of the family.
When Should An Owner Start Planning?
Before a sale, a death, or a lawsuit makes the choices for them. Many planning steps take time to put in place and cannot be added after the event.
Is This Article Legal Or Tax Advice?
No. It is general information. A lawyer and a tax adviser must look at the facts of each case.
Sources
1. Tax Foundation, Who Pays Federal Income Taxes? Tax Year 2023
2. Federal Reserve Distributional Financial Accounts, Net Worth Held by the Top 1% (FRED):
3. Internal Revenue Service, What’s New: Estate and Gift 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: This article is for general informational and educational purposes only and does not constitute legal, tax, financial, or investment advice. Tax laws, regulations, and individual circumstances may vary. Readers should consult a qualified attorney, tax professional, or financial advisor before making decisions based on the information presented. Reading this article does not establish an attorney-client relationship.
