House, no mortgage, but deferred property taxes

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Berner Lady
Berner Lady Member ✭✭
edited January 2021 in Registers & Transactions (Windows)
I currently have an asset account "House" having no mortgage....and make annual adjustments to increase/decrease current value. I also have a separate debt account "deferred property taxes" and make adjustments to add the deferred property taxes.......which in reality decrease the value of the asset account.
So, generally both accounts would increase.....the asset as house prices rise, and the debt as the deferred property taxes increase annually.
I wonder if this should have been set up differently? and would appreciate suggestions. Thanks
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Answers

  • Boatnmaniac
    Boatnmaniac SuperUser ✭✭✭✭✭
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    @Berner Lady - What I have done is set up a recurring annual Bill Reminder using the Tax:Property Tax category which is linked to Schedule A:Real Estate Taxes.  Then each year I adjust the property tax dollar amount as needed. 
    This process allows the bill to be captured properly in Tax Planner and in the Tax Schedule and Tax Summary reports, as well as in Lifetime Planner, and in Projected Balances, Cash Flows, Budgets and most other applicable Quicken reports and tools.
    This process also will not cause that undesired and inappropriate effect of decreasing the market value of the house because in real life property taxes do not directly impact the market value of the house.

    (Quicken Classic Premier Subscription: R55.15 on Windows 11)

  • Berner Lady
    Berner Lady Member ✭✭
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    Thanks, but I guess I have not explained things quite correctly. I see your thinking, that taxes are just another household expense, same as electricity, maintenance, etc.

    I am not in fact paying any property taxes as in British Columbia (Canada) seniors can defer them and when the house is sold the taxes have to be paid back. So in reality a house is (generally) increasing in value as real estate prices go up, but the property taxes owing are increasing, that eventually have to be paid, either when sold (to downsize) or upon death.
    The way I have done it just means I take the Asset (house), less the deferred taxes (debt) to arrive at a "Net Worth" for the house.
    Just wondering if there was a better way of doing it?
    Thanks
  • Boatnmaniac
    Boatnmaniac SuperUser ✭✭✭✭✭
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    Ah, I understand now.  Unfortunately, I am not very familiar with Canada property tax laws so I cannot give you a good answer but based upon the additional information you provided it seems that the process you are using is reasonable.  Maybe someone else can provide you with a better response.

    (Quicken Classic Premier Subscription: R55.15 on Windows 11)

  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
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    I agree with @Boatnmaniac that the property taxes are a separate issue from the value of the house, even in your case of deferring the payment of the taxes until closing on the sale of the property.  So, yes, while the house may (hopefully) be increasing over time, you are also increasing the liability (debt) that you need to cover.  

    Another viewpoint - The value of the house is what the buyers will pay, not what you get at closing.  The buyers do not particularly care if you are a senior who has chosen to defer taxes or not.  That does not affect their valuation of the property.  It should not affect your valuation. 

    So I also agree that your having two separate accounts is the proper setup.  It is just one phrase in your initial presentation that seem off-base:  "... which in reality decrease the value of the asset account".  Reality says to me that liability account decreases what you get in the end, rather than decreases the value of the house. 

    make adjustments to add the deferred property taxes
    I would not be making adjustments along the way that transfer from the liability account to the house asset account (decreasing liability and decreasing house to a 'net' value).  A primary value of keeping the Property Tax Liability account steadily increasing is that upon sale, you could see that the right total amount would be paid to the taxing agency rather than to you.         
  • Berner Lady
    Berner Lady Member ✭✭
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    Thank you very much for your responses, and that you basically agree that I have set it up in a way that accomplishes what I intended. It did make sense at the time, and you have just reconfirmed that it made sense.

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