If you're lucky enough, you had a grandfather who saved that first edition of "Batman" he bought for a penny and it got handed down to you, because it's now worth a small fortune. The rise in value of an asset over time is called appreciation. Assets that often appreciate include real estate, stock, gold and collectibles. You'll appreciate the fact that calculating appreciation only requires a simple arithmetic.
Record the asset's initial value. For example, if you purchase a home for $200,000, use $200,000 as the initial value.
Record the asset's ending value. Let's say you sell your home for $250,000. In this case, you'd use $250,000 as the ending value.
Subtract the initial value from the ending value. The result is the total appreciation of the asset in dollars. To calculate average annual appreciation, divide the result by the number of years that separate the initial value and the ending value. For instance, if you bought a home for $200,000 five years ago and sold it for $250,000, the total appreciation is $50,000. The average annual appreciation is $50,000 divided by 5 years or $10,000 a year.
Items you will need
- The calculations for appreciation work for any asset that increases in value over time, from gold and jewelry, to art and old comic books.
- Assets like homes and stocks can also lose value or "depreciate." Calculating depreciation follows the same steps used to calculate appreciation; if an asset loses value, the result is a negative number.
- If you sell an asset that has gained value over time, Uncle Sam makes you pay capital gains tax on the total profit or gain. Capital gains tax is capped at a maximum rate of 15 percent for assets you hold longer than a year and equals your income tax rate for assets you hold less than a year.
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