How to Calculate Net Worth Tax

Even if you don’t do your own taxes each year, you may have heard about a net worth tax, also known as a wealth tax. A wealth tax is a tax levied by the government based on your net worth. The United States doesn’t levy a general wealth tax, but it does collect a payroll tax, income tax, and property tax. Still, you may find it useful to understand what a net worth tax might look like.

If you’d like to calculate your net worth and hypothetical net worth tax, this information will help you determine which steps to take.

What Is Net Worth?

Your net worth is the difference between your assets and liabilities. Assets are things you own, such as homes and cash, that have value. Liabilities include debts and loans you owe, such as a mortgage. They reduce your net worth.

  If you’d like to calculate your own net worth, subtract your liabilities from your assets. If you have $800,000 in assets and $300,000 in liabilities, your net worth is $500,000. You can also have a negative net worth if you have more liabilities than assets. For example, if you have $10,000 in savings but $20,000 in student loans, your net worth would be -$10,000.

In some cases, determining the value of assets and liabilities can be difficult. When you calculate net worth, it’s important that you use the fair market value to find out how much you own or owe.


You may find that it’s not so easy to determine the value of your assets. After all, your assets might include businesses, jewelry, homes, commercial properties, and more. Accountants and other financial professionals can help you determine the value of your assets in these situations.

One thing to remember is that you may have assets that aren’t as obvious as cash or a checking account. For instance, you may have a retirement or pension plan, treasury bills, vehicles, artwork, antiques, or a life insurance policy with cash value. Equity in your home is also an asset.


Just as assets can become murky, so can liabilities. Liabilities don’t include just your credit card debt, personal loans, and student loan debt. Liabilities also include taxes you owe, child support payments, alimony payments, business debt, and any legally binding support you’ve promised. This isn’t a comprehensive list, so it’s important that you discuss your liabilities with an accountant for the most reliable information.

Calculating a Hypothetical Wealth Tax

In some cases, determining a wealth tax is straightforward and based on a simple percentage. Let’s say that you live somewhere with a 3% wealth tax. If your net worth is $500,000, you’d multiply this figure by 0.03, or 3%. As a result, your tax bill would be $15,000.  

You may find that a wealth tax calculation isn’t this simple though. Some countries and regions may calculate wealth taxes differently. For instance, some tax authorities may not collect tax on certain assets, or they may place different types of taxes on different types of property. So, you may find that your location collects 2% taxes on real estate assets and 3% tax on cash assets, for example. This means you’ll need to have a solid understanding of the value of each asset you own.

Is Wealth Taxed in the United States?

The United States doesn’t have a tax on general wealth or net worth. Still, the government can tax specific types of wealth, including inheritance, property, and estates. The United States also taxes income that you earn, and you may end up paying more if you make more money. A property tax is one way in which the United States government collects tax for certain types of wealth.

Additionally, the U.S. does have a tax on capital gains. A tax on capital gains collects tax on profits you receive from selling assets, such as bonds, stocks, real estate, and other properties. The government doesn’t collect this tax until after you sell an asset, which does give you some power in determining when to pay this tax.

If you move to another country or own property elsewhere, you may find that you need to pay more attention to net worth taxes. In some countries, policies exist to prevent the taxation of certain types of assets, including owner-occupied houses, small businesses, pension funds, trusts, and gifts. Generally, wealth tax exempts some positive net worth. For example, you may not have to pay a net worth tax on the first million dollars of your net worth.

Understanding Wealth vs. Income

If you plan to calculate your net worth, you should know that wealth and income are different. Your wealth is the total value of your assets minus the value of your liabilities. If everything you owned and owed were transformed into cash, it’s the cash you’d be left with.

On the other hand, your income is the money you receive, typically from work, interest, or dividends. Authorities may tax you based on different income brackets as well as your tax filing status. Most people pay their income tax when they earn the income, and it comes out of their paycheck right away. They file an income tax return each year to ensure that you paid the correct amount of tax. If you paid more taxes than you owed, you’ll receive an income tax return.

Accounting Helps You Track Income and Wealth

You don’t have to rely on your own math and understanding of tax law to find important figures, such as your net worth. In fact, it might be better to find an experienced accountant to help you determine your net worth and taxable income. At Pasquesi Sheppard in Lake Forest, Illinois, our accountants can help you determine the balance of your assets and liabilities so that you have a better understanding of your financial worth. While you may not owe a net worth tax in the United States, understanding your net worth can help you make sound financial decisions.

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