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Asset accounts work very much like bank accounts, and the mechanics of keeping track of asset with Money are straightforward. Asset record keeping, however, can be a little tricky. So, in the rest of this installment, I will give you ideas about how to make the whole process easier.
Your Home
Your home is usually your single largest asset. If you own a home and have decided to track your net worth with Money, you will want to set up a home, or personal residence, account and use it to track the value of your home. The historical appreciation of real estate makes attempting to track the fair market value of a home interesting to say the least. However, it makes more sense to track the original cost of a home as well as the cost of any home improvements. The reason for this is that in general, the gains you realize when you sell a house are taxed as income.
Even if you think that one of the two capital gains exceptions might apply to you, it makes sense to keep a record of your home’s cost as well as the cost of the improvements you make to it. There is no harm in doing so, the work is extremely minimal, and you might someday save a lot of money (because of the exceptions mentioned earlier might not apply).
To keep a record of a home’s cost in the cost of improvements, you first set up an asset account named something like “Home” or ” Residence.” (We described how to do this at the beginning of this series.) In this account, you record as transactions the original cost of the home as well as associated purchase costs such as escrow fees and title insurance. In the future, whenever you spend money to improve your home, you transfer the money from your checking account to the asset account set up for your home.
What qualifies as an improvement? Anything that adds value to a home or to its useful life. For example, adding a swimming pool, finishing the basement, and landscaping the yard, all qualify as improvements. However, maintenance costs such as those for painting the exterior or interior, repairing a leaky roof, or fixing faulty electrical wiring don’t qualify as improvements.
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Disclaimer: The views expressed by this author don't necessarily reflect the opinions of Lazerloan.com, it's owners, or it's affliates.
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