OBJECTIVE:To examine whether observed differences in dementia rates between black and white older people living in the community could be explained by measures of socioeconomic status (income, financial adequacy, education, and literacy) and health related factors. DESIGN:Prospective cohort study. SETTING:General community from two clinic sites in the United States (Pittsburgh, Pennsylvania and Memphis, Tennessee). PARTICIPANTS:2457 older people (mean age 73.6 years; 1019 (41.5%) black; 1233 (50.2%) women), dementia-free at baseline, in the Health, Aging, and Body Composition study. MAIN OUTCOME MEASURE:Dementia was determined over 12 years (ending January 2011) by prescribed dementia drugs, hospital records, and decline in global cognitive scores. The influence of socioeconomic status and health related factors on dementia rates was examined in a series of Cox proportional hazard models in which these variables were added sequentially in covariate blocks. RESULTS:Over follow-up, 449 (18.3%) participants developed dementia. Black participants were more likely than white participants to develop dementia (211 (20.7%) v 238 (16.6%), P<0.001; unadjusted hazard ratio 1.44, 95% confidence interval 1.20 to 1.74). The hazard ratio lessened somewhat after adjustment for demographics, apolipoprotein E e4, comorbidities, and lifestyle factors (1.37, 1.12 to 1.67) but was greatly reduced and no longer statistically significant when socioeconomic status was added (1.09, 0.87 to 1.37). CONCLUSION:These findings suggest that differences in the burden of risk factors, especially socioeconomic status, may contribute to the higher rates of dementia seen among black compared with white older people. Strategies aimed at reducing these disparities may favorably affect the incidence of dementia.