A $2.2 million portfolio sits between comfortable and truly wealthy. What it pays depends on two levers: the yield you pull, and the state you file in. Florida charges no state income tax and ranks 4th nationally for tax competitiveness. New York sits at 50th, dead last, with the worst individual income tax rank in the country. On identical portfolio income, that gap is real money every year.
The Conservative Tier: 3% to 4% Yield
At a 3.5% blended yield, a $2.2 million portfolio produces roughly $77,000 in gross annual income. This is dividend growth and broad-market territory: quality dividend ETFs, aristocrats, and blue-chip equity income funds. Most distributions are qualified dividends, taxed at the 15% federal long-term capital gains rate for retirees in the middle brackets.
In Florida, that $77,000 faces federal tax only. In New York, add a state marginal rate of roughly 6% at this income level. The weighted state and local tax burden for a New York resident runs $10,828 per capita versus $5,110 in Florida, and portfolio income sits inside that gap. The New York investor typically nets around $4,500 to $5,000 less per year at this tier, before local city tax.
The Moderate Tier: 5% to 7% Yield
Push the yield to 6% and the same $2.2 million throws off about $132,000 a year. This is covered call ETF territory, along with preferred shares, REITs, and high-dividend equity funds. Most of this income is ordinary, not qualified. Covered call distributions are typically taxed as ordinary income or return of capital, and REIT dividends are almost always ordinary.
That tax character matters more than the yield jump. At $132,000, a single filer sits in the 24% federal bracket for 2026, which begins at $105,700. New York’s marginal rate at this income runs around 6.3%. The Florida-vs-New York gap widens to roughly $8,000 to $9,000 per year on ordinary portfolio income at this tier.
The Aggressive Tier: 8% to 12% Yield
A 10% blended yield pulls $220,000 from the same $2.2 million. That means leveraged covered call funds, business development companies, and mortgage REITs. Every dollar is ordinary income, and at $220,000 you cross the 3.8% Net Investment Income Tax threshold ($200,000 single, $250,000 married filing jointly).
New York’s marginal rate here approaches 6.9%. Combined with NIIT and a federal marginal rate of 32% starting at $201,775 for single filers in 2026, the New York resident loses $14,000 to $16,000 more per year than a Floridian holding an identical portfolio. Over a 20-year retirement, that is a mid-sized house.
The Yield Environment Now
Context on “safe yield”: the 10-year Treasury sits at 4.7%, near the top of its 12-month range, while the 30-year yields 5.2%. The Fed funds rate has held at 3.8% since December, and the national average 12-month CD sits at just 1.7% APY, though top online banks pay 3 to 5 times that. Treasury interest is exempt from New York state tax, which quietly closes part of the Florida-vs-New York gap for bond-heavy portfolios.
The Insight Most Readers Miss
The 10% aggressive tier looks like triple the income of the 3.5% conservative tier. In practice, a 3.5% yield growing 8% annually doubles in about nine years. A 10% yield from BDCs and mortgage REITs typically stays flat or declines, with periodic distribution cuts and principal erosion. The dividend growth investor at $77,000 today could be pulling $154,000 in a decade, with the portfolio intact. The high-yield investor at $220,000 may still be at $220,000, but with a smaller asset base.
New York residents face another wrinkle: growth is only taxed on realization, but high-yield distributions are taxed every year. The compounding tier is also the tax-deferral tier.
What to Do Next
- Separate qualified from ordinary income in your projections. A portfolio yielding 4% in qualified dividends can net more than one yielding 6% in ordinary income, especially in New York. Ask your broker for a distribution tax-character breakdown on every fund you hold.
- Model the New York City surtax if you live in the five boroughs. The state comparison above excludes NYC’s additional income tax, which can add another 3% to 3.9%. A Manhattan resident on the aggressive tier gives up close to 10% of gross portfolio income to combined state and city tax before federal.
- Run a Treasury-heavy allocation through both scenarios. With the 5-year at 4.4% and the 10-year at 4.7%, and full New York state exemption on that interest, the Florida advantage narrows sharply for bond-focused retirees. It widens again for anyone holding REIT and covered call income.
The $2.2 million is the same in both states. Everything downstream decides what actually lands in the account.
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