Is it bad practice to git init in the $home directory to keep track of dot files?

Create a "bare" git repository:

cd $HOME
git init --bare .dotfiles

The --bare flag creates a repository that doesn’t have a working directory, making it impossible to edit files and commit changes in that repository.

Create an alias to manage the repository we just created:

alias dotfiles="/usr/bin/git --git-dir=$HOME/.dotfiles/ --work-tree=$HOME"

Ignore the files that are not being tracked from being shown up in git status:

dotfiles config --local status.showUntrackedFiles no

Add your desired files:

dotfiles add .bash_aliases

Commit.

dotfiles commit -m 'Add .bash_aliases'

Now with the use of a bare repository, there is no .git directory in your $HOME directory; so it does not introduce any surprises while working with git.

That's how I manage my dotfiles. I first read about it here years ago.

It is a good practice, but you should ignore all files by default and just add the files you need. Here is an example of a .gitignore:

# ignore all
*
# include dot files (including .gitignore)
!.*

You can also exclude other files putting other lines at the end of your .gitignore:

# ignore all
*
# include dot files (including .gitignore)
!.*
.ssh