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Your total net worth is a fairly basic calculation. You add up all of your assets before deducting all of your debts.
Positive/Negative Net Worth
If your cumulative assets are worth more than your total sum of liabilities and debts, then you currently have what is known as a positive net worth. You essentially have more money than obligations. On the other hand, if you have more liabilities than assets, then your net worth is in a negative state. You’re in the hole, so to speak. Both negative and positive net worth statuses have a variety of tax implications at the state and federal levels.
Sometimes it’s Not So Simple
If your estate includes forms of intellectual property, such as patents or copyrights, then you might have to also include a calculation of your tangible net worth. In this case, you sum all tangible assets, including all forms of IP, and subtract them with your hard liabilities.
Tax Attorneys Can Help You
Calculating your net worth is simpler when your financial affairs are limited and uncomplicated. However, the further you get into life, the less likely this is to be the case. As it gets more complex, so to do the potential tax consequences. Consulting the right tax attorneys is always a good idea if you want to keep the government off your back, protect your financial assets, and enjoy peace of mind about all of this.
The Difference Between Tangible and Intangible Assets
Tangible assets are the things you own that are easily converted into currency or cash. Obviously, cash itself counts, as do investments, personal possessions, homes and land, and also investments. Intangible assets are things you can’t really hold with your hands, including trademarks, patents, copyrights, goodwill and all manner of intellectual properties.
The Basic Formula
The basic formula for all of this is as follows:
Assets—liabilities—intangible assets = your net worth
Calculating all of this on your own is possible using online calculators or a spreadsheet. That can give you a good idea of how your big picture stacks up. However, when it comes to actually filing taxes, getting professional help on the finer points and actual details can mean the difference between owing money or possibly getting something back from the government. Depending on the size of your assets and liabilities, the investment can have a serious return of investment.
Rachelle Wilber is a freelance writer living in the San Diego, California area. She graduated from San Diego State University with her Bachelor’s Degree in Journalism and Media Studies. She tries to find an interest in all topics and themes, which prompts her writing. When she isn’t on her porch writing in the sun, you can find her shopping, at the beach, or at the gym. Follow her on Twitter and Facebook: @RachelleWilber.
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