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How to Make Non Taxable Income (And Keep It a Secret) - YouTube
Channel: Tiffany Thomas, Your Wealth Mentor
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i'm sure a lot of us have heard that our
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three biggest expenses are housing
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transportation and food but according to
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a nasdaq article
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they say there is no doubt about it
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taxes are by far the single largest
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expense that most americans pay every
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year we often forget about taxes because
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they usually come directly out of our
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paycheck so we never see that money
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coming out and then we don't really
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think about it until we have to do our
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taxes in the following year in april but
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if taxes really are our largest expense
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or close to it then today you're going
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to learn how to make money in three
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different ways that is non-taxable
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income so you can keep more of your
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money in your own pocket i am tiffany
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thomas with wealthytiffany.com and i
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achieved financial freedom at age 38 and
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if you are looking to achieve financial
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freedom at a young age as well hit that
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like button and hit the subscribe button
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and we are going to dive right in first
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off let's talk about the most
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traditional way that people do make
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money and this is through a nine to five
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job they usually work 40 hours for a
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certain salary but they aren't receiving
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all of that salary a lot of that is
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going to taxes
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on average people pay over 15 000
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a year in taxes the most recent irs data
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revealed that americans who filed
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taxable returns paid an average income
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tax payment of fifteen thousand three
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hundred and twenty two in 2018. so i'm
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sure that number has gone up in the past
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few years the first way to have
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non-taxable income is by setting up a
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roth ira a roth individual retirement
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account it's a retirement account that
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you can set up on your own you don't
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need to be working a nine-to-five job
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and have it set up through your employer
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i personally have my roth ira through a
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vanguard
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one of the reasons that i like a roth
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ira is because when you contribute money
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yes you do pay taxes on that money but
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when you withdraw that money you do not
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pay any taxes on that money so it is
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able to grow tax free over how many ever
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years you keep it in there you can
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contribute up to six thousand dollars
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per year to a roth ira and if you do
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that every year that money will continue
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to grow exponentially over time because
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of compound interest and as that money
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does grow and grow and grow when you
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withdraw that money you do not have to
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pay any taxes and since it is a
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retirement account any money that you
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are earning in the roth ira you're not
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able to withdraw that until age 69 and a
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half but you can withdraw your
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contributions any money that you put
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into the account at any time without any
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penalty and without paying taxes again
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on your money and plus you are not
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required to start withdrawing that money
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at any time unlike a traditional ira so
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that's just a another benefit of a roth
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ira you can let that money just grow and
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grow and grow and you can take all of
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that money out all of the money that
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you've earned at age 59 and a half and
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not pay any taxes on it just to give you
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an example i have contributed to my roth
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ira but a few years ago i ended up
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purchasing another property and i wanted
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to use some of my money from my roth ira
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so i took out what i had contributed to
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my roth ira and i didn't have to pay a
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penalty when i did that or pay taxes on
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that money again because i already paid
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taxes when i put the money in and i was
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able to put that toward my down payment
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on the property i was purchasing when
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you are in your retirement years you're
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able to
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live off of a roth ira without having to
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pay taxes on that money which can be
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really great because you may be in a
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higher tax bracket especially if you
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have a traditional ira because you will
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be required to start withdrawing that
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money each year and you will definitely
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have to pay taxes on that money and if
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you want to learn more about a roth ira
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i have a video completely dedicated to
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that i will leave a link above and below
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in the description you can check that
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out later on so comment below and tell
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me if you already have a roth ira set up
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the second way that you can have
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non-taxable income is by investing in
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stocks and this is actually one of my
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favorite ways to do this because you can
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set up a brokerage account which means
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you can withdraw that money at any point
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without a penalty but the catch here is
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if you keep those investments in your
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brokerage account for at least one year
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then you will be paying what's called a
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long-term capital gains tax which is
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going to be lower than a short-term
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capital gains tax when you sell off
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those investments in your brokerage
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account and they have made a profit for
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you so that just means if you
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bought a share of a stock for twenty
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dollars and then you were selling it for
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thirty dollars and you've made a ten
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dollar profit then that would be
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considered a capital gain
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if you bought it for ten and sold it for
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five that would be a capital loss when
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you set up your brokerage account and
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you invest in stocks or etfs whatever it
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might be
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then hold that money for at least a year
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and then you'll be able to pay long-term
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capital gains tax and this can be
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zero dollars so non-taxable depending on
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which state you live in if you are
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single and you are making up to forty
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thousand four hundred dollars per year
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then your capital gains tax rate would
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be zero percent if you are married it
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would be eighty thousand eight hundred
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dollars per year and you would still be
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able to get zero percent interest for
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that capital gains tax rate and yes this
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doesn't apply to all states but the
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majority of states and it is a federal
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income tax so depending on which state
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you are in you may have to pay state
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income tax and if that is the case maybe
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it's time to consider moving to a state
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that doesn't have a state income tax
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it's just an idea because it is another
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way that you would have non-taxable
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income and if you are single making over
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that forty thousand four hundred dollars
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up to four hundred and forty five
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thousand eight hundred and fifty dollars
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then you would pay fifteen percent and
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the capital gains tax rate which is
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still better than the ordinary income
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tax rate and if you are a high roller
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making over the 445 850 then you're only
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going to pay 20
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for the capital gains tax rate and if
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you're married it is higher so anywhere
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from eighty thousand eight hundred and
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one dollars to five hundred and one
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thousand six hundred dollars you would
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pay that fifteen percent and then over
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five hundred and one thousand six
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hundred dollars you would pay twenty
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percent
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and i have personally done this i have a
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brokerage account set up and when i was
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purchasing that fourth property of mine
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i decided to use some of that money from
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my roth ira
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and some from my brokerage account so i
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had investments in there that had been
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in there over a year and some people
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seem to be worried about putting their
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money into a brokerage account because
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they have to pay taxes on that but as
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we've just talked about if you are
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making a
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lower income around that 40 000 being
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single or that 80 000 by being married
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then you would have that zero percent
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rate the third way to have non-taxable
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income is by contributing to an hsa a
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health savings account this is such a
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great investment vehicle that a lot of
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people don't know about and yes you do
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have to qualify to have an hsa you need
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a high deductible health plan that is
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hsa qualified it's very advantageous to
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reduce your taxes because any money that
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you're putting into your hsa you are not
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taxed on like you would be for a roth
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ira and then any money you are pulling
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out for any medical expenses you are not
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taxed on that money either and most hsa
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providers let you invest that money in
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the stock market so it's not just
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sitting in a savings account not earning
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you hardly anything but you can actually
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put that money into the stock market and
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you can invest it which means that will
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grow exponentially over time
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the maximum contribution amounts for an
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hsa for a single person is thousand five
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hundred and fifty and then for family
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coverage it is seven thousand one
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hundred dollars per year and if you're
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thinking that's not that much money if
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you are investing that money in the
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stock market every single year then it
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will definitely grow into a large amount
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over time and with an hsa you do not
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have to take that money out every year
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like you would with an fsa a flex
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spending account those two are very
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different so don't get them confused in
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hsa you can continue to roll that money
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over you can save all of your medical
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receipts and get reimbursed for those
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years later and when we are getting
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older we tend to spend more money on
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medical expenses so the hsa makes it
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really nice because you can build up
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that money over time and then if you
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need a hip replacement years down the
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road you can use that money from your
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hsa completely tax-free completely and
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penalty-free and use that to pay for
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your hip replacement the hsa money is
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completely tax-free when you are using
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it for any medical expense that you
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might have but if you do want to use the
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money for a non-medical related expense
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after age 65 then you can do that and
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you would pay taxes on it and if you're
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thinking i don't have a lot of medical
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expenses there are some expenses in
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there that you may not think about as a
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medical expense for example contact
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solution or if you are getting lasik or
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prk which i just had done you can use
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your hsa for those expenses
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and when i had my prk surgery my eye
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surgery done i did not use my hsa for
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that i will save that receipt and when i
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want extra income then i will get
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reimbursed that amount for my prk
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surgery
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and i will not have to pay taxes on any
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of that money and if you want to learn
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all of the details about an hsa health
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savings account i did create a separate
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video about that i will leave a link
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above and below you can check that one
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out later on that is the third way that
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i wanted to talk about on how to have
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non-taxable income and i actually want
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to give you a fourth way this is a bonus
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way of creating non-taxable income just
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because i thought it was pretty
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interesting if you rent out your house
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for 14 days or fewer out of the year
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then you do not have to clear that
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income that you are receiving on your
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taxes and if you're thinking oh i have
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no plan to rent out my house i just want
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to give a quick example a few years ago
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when we had that total eclipse the solar
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eclipse there were a lot of people that
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were traveling to idaho which is not
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usually a popular state to travel to
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but it was crazy hotels were completely
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booked out and people started letting
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other people park in their driveway or
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camp on their lawns or even rent out
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their basement or part of their house so
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if there is some event that is happening
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in your area then you can take advantage
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of that and rent out your house or even
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just your garage or your yard
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and you can do that for 14 days or fewer
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and not declare that rental income on
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your taxes i also heard of a guy that
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decided to list his house on airbnb or
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vrbo one of those vacation sites and he
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listed it for a pretty high price but
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when someone took him up on that offer
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on that high price then he would take
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his family and they would go stay with
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relatives for the weekend or however
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long the people wanted to rent his house
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for and he made a decent sum of money by
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doing that so just try to be open to
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different possibilities or opportunities
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if you want to create a little extra
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income and especially non-taxable income
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hopefully these items will help you pay
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less in taxes and you can use that money
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for something else i know there are a
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lot of other ways to create non-taxable
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income so comment below and tell me what
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is your favorite way to create some
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income that you are not going to have to
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pay taxes on if you found this video
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helpful please hit that like button and
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share it with someone else and hit the
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subscribe button to subscribe to my
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youtube channel and hit the little bell
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to get notified on when i post new
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videos and if you want to see more
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content for me check out the videos on
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the sides of the screen thanks so much
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for watching i'll see you in the next
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video
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