Broadcasting worldwide on internet radio refreshing takes on legal strategies straightforward answers to difficult tax questions independent ideas on building wealth It's the refresher wealth show with mark kohler and matt sorenson Get your free copy of mark and matt's ebooks and sign up for their weekly free newsletter with important tax deadlines and articles at refreshyourwealth.com Now Here's mark and max welcome everyone to the refresher wealth podcast with mark kohler and matt sorensen Ah excited to be here. It's summer arizona's beautiful despite, you know 115 degree temperatures and uh And we're talking about a cool topic today, too Um a big topic an underutilized topic a great tax strategy misunderstood, correct? Yeah under misunderstood unknown One that has some new things in 2020. You might not know about yeah some new ways you can use it All right, and if you've seen the title of the show friends, you know what that is. It's the health savings account and we do a show once a year on this because it's always um The contribution amounts change every year there's always some little tweak Frankly, the strategy only has gotten better and better over the years And if you some of you are like well I work for someone else. I can't have an hsa Oh, you might you don't know So yeah, we want to tell you all the cool things about this and then how you can get one And that's the point of the show and I think you'll really enjoy it. It's gonna be good. Yeah Now let's uh, we to hit some current events though. Let you know what's going on in the world of tax and business Um, and then uh, also maybe give you a tax and legal tip off topic Uh, so if you're new to the show, that's kind of the current format how we like to run it? We have an open forum a call-in show Where you can call in with questions that we do every three weeks so, um and I like this I like this current event piece matt, because I am not liking turning on the news right now. I mean There's You know who's getting tear gassed? I mean and rioting I mean i've hey, i'm all up for a good protest, but rioting and destroying courthouses and then there's senate hearings and then there's Cobit updates watching the news is not fun. And so we get another line of news I guess if you will we're tied into a variety of um, Wires or news feeds that give us News about small business and investing and stuff that you want to know that's not depressing so, uh I think we could have some interesting points i'm going to throw out a big word matt, because I know you've been following it Cryptocurrency a little update there. Yeah. Yeah, so you know with all the stimulus spending that's going out a lot of people who Think we're going to have massive inflation and don't believe in the dollar and the government prints money whenever they want Crypto and gold get a little popular And that's one thing a lot of our clients that are self-directed actually invest into so we've been seeing a lot more interest At directed ira and client accounts here. We got a couple thousand now already so They're like, hey, I want to buy crypto. Can I buy it i'm seeing bitcoin now at 11 000 per bitcoin You know I did videos back when it was at 2500 Um, and of course that people were buying it way before that and it's been up and down and it's speculative So i'm not saying buy some or not. I have freaking no idea, but i'm just saying that's a that's a big trending item Right now is in the investment world is crypto and gold They're starting to trend up as a counterbalance to all the spending and government printing of money that's happening and I think for some of you that are new to our show, or just getting to know us or even if You've known us for years. We don't sell financial. Um Investments, uh real estate or cryptocurrency or gold or silver or precious metals. We don't sell that stuff But we with our five tax lawyers including matt myself.7 then in the accounting firm We've got close to 12 cpas in the middle of tax season. We see patterns We see patterns of people making money and losing money and this and that and I get some hate Comments on youtube once in a while when I even mention the cryptocurrency work So for some of you like, ah, these guys are crackpots, they brought up i'm not telling you to buy crypto But i'm telling you I had clients that made a million dollars when it ran up the first time. It's crazy it's and they did and Is it speculative sure, but no i'm just telling you. Yeah, what's going on? Hey, hey, we report you decide uh, because I don't know which news station does that but that feels right so And that that's how we are that's what self-directing is all about And that's what being a business owner and and I think really living the american dream is all about is finding what works for you Going after it working hard having the satisfaction that you made a good decision for yourself. And so um so but you can do that in an ira that's the cool thing is people can buy crypto in ira and we're seeing that Like I said at directed ira right now, so now i've got another news Point now my sister-in-law is so funny. He sent me this, uh uh Clip from buzzfeed this morning on this florida, man Who took? uh his ppp money Lied about payroll multiple businesses had some legitimate business and it appears everyone's innocent until proven guilty but appears to have Racked up three or four actually he put in seven ppp applications and got over two million dollars Maybe he was making money Maybe he wasn't but it didn't look good when he drained his bank not trained Took his bank account and bought a bunch of cool stuff including a lamborghini. Here's the here's the picture this thing is Pretty pretty sexy. Yeah, this is this cool orange lamborghini, and I love reading the comments Shit this one woman said, uh classic it starts out with a florida man. What did you expect? Yeah No offense to those of you in florida that are men. But um, yeah, it's going to track the criminal element. Let's just see but but the in the side note here in the in the current news event on this is the government is cross-checking in their computer systems Uh at the very least people that are applying for ppp money. And did they have actual payroll and were they? What? Blew the case on this one. His company wasn't even registered with the state. It was defunct And so that threw up a red flag So this is why company maintenance and doing your minutes and making sure those things are paid We have a service for that very affordable some of the cheapest in the country. Um and Making sure you are legit on these types of applications So they're gonna they're gonna make an example of this guy because they want a chilling effect people out there They're screwing around with ppp money. This freaks people out. You know, I I bought a new computer is that bad? You know, and yeah Yeah, you got to be careful with that pvp money and idle money and if you've got some mistakenly be ready to pay that back Because right now when we're in chaos right now and the government's like we want to get money out there It's all hunky dory. But i'm telling you next year the attitude government. The people are going to be like People got money that shouldn't have and we need to chase those people down And so if you're in that camp You do not want to be on the receiving end of that because you're talking criminal charges not like you need you owe us The money back they're going to go after you for fraud and criminal charges. And so so just be careful Um, we've been getting some questions on that ppp is ending in A few a couple days. Yeah, right So applicate the application to get ppm right a new loan if you haven't done ppp yet, right? So your your deadline is just in a couple days, so that's another news update Now all the stimulus debate right unemployment. The 600 bucks is going away in a couple days Um, they're negotiating that we'll update you next week Of course if a bill passes over the weekend who knows looks like there's not a lot for small business I'll just be honest. It looks like it's more unemployment um insurance some credits if people go back to work from unemployment and um Yeah, I mean there's some other stuff covered Health related. Yeah, I want to add this on the ppp front A lot of people are asking. What can I apply for my forgiveness now is the easy application available? Um, yeah, the application's out there but banks for the most part are not accepting it yet they're trying to get their system in order so that when those applications come in, it's like Done and instead of the banks scrambling like they did on the first round to get the money out. So when people ask for forgiveness, It's going to be hopefully much more streamlined and simple and there's certain applications out there That have been if you have a loan that meets certain criteria, they're trying to get automatic forgiveness for loans under 150 000. So Stay tuned. We've got some great videos. I say that humbly and the youtube podcast as well as Um, sorry in the youtube videos and podcast which our show is simulcast. Uh, Get out get over and check those out some of those later shows because we talked about the forgiveness procedure I've got an article as well as matt. Both of us have articles on entrepreneur.com On getting forgiveness for the ppp. So yeah. Yeah just don't leave it up to your accountant or your lawyer. You don't get involved In the next few months, that's what's going to be happening is people will start doing forgiveness. So that's coming down There's a lot of people who want it done right? It's like I spent the money, right? I want to get it forgiven. I want to be done with it I want this debt out on my books or just even seeing it I just want to be done with it and move on. Let me get that so it's coming and we'll be updating you Of course. Yeah. All right. Well before we get to hsas Uh and the main topic which is pretty cool because it's a great tax strategy. You can self-direct. Like I said, it's cool We like to give a tax and legal tip and uh I'd like am I doing you're doing legal legals? I got tax tip. Okay, i'll throw down legal. All right, let's do it. All right legal tip A legal tip that you can actually use a legal tip where you don't feel like you have to take a shower after Okay on this legal tip. I want to talk about a personal situation my wife and family sometimes hate it when I use personal examples because you know, I draw back the curtain on our lives and Privacy I do teach privacy, but you know it is what it is when you're out there trying to market yourself But it was interesting. Um doing some yard work and I had one of my nephews come over a couple weeks ago and I had Two or three of my nephews and two neighbor kids come over and help dig some dirt move some rock things like that well He hurt his shoulder um he was using a pick trying to break through this this hard spot in the ground and And he tore his rotator cuff or something like that some some rotator in the word cuff involved. So whatever that is um And uh, probably a car part to me, but okay. Yeah, I know it is. Yeah It's like a major league picture tears on rotator cuff at napa auto parts. They're 49.95 right now. Yeah, um, but anyway, uh he Hurts his shoulder. Well, he goes home tells his mom and dad and they didn't say anything for a couple days But they had to take him to the doctor. He's in physical therapy and a few days later. I'm like dude What's up with your shoulder? He's like, uh, I heard it. Where's your hair at your house? I'm like What? so I immediately went and saw his mom and dad who are great their family, you know their family and and I you know, See him probably three times a week, but I went over and said hey, I just heard you didn't tell me um This little guy hurt his shoulder little guy He's 19 20 years old but he hurt his shoulder working in my yard and they're like, yeah, we didn't want to say anything I'm, like i'm paying the bill and they're like Thanks. You're awesome You know and and they have insurance and there'll be some copays and this and that and some physical therapy But I told them I don't want one dime coming out of your pocket now maybe I'm different than others. Maybe i'm upstanding guy. Maybe I don't know and it's family and all that but but the point is That could have been one of the neighbor kids um And if that was one of the neighbor kids that got hurt and now A lawsuit could occur I could be on the hook for a lot of money. It could be a dangerous situation so the legal tip is In your business and at your home be careful paying people under the table You may want to make sure you have a licensed contractor. I know it costs more. I know I know it costs more But you might want a licensed contractor you may want um to have them on your own payroll in your company and do Make sure they're under workers comp And not try to write it off in your business if they're working for your program your personal residence things like that I'm not talking about tax issues. That's all other story But when you have people working for you doing manual labor in your home at your office, and they get hurt It's scary so that's when Lawsuits happen and it's when you don't have any sort of insurance now some of you may be going to work couldn't you make a claim under your homeowner's policy and I could um I've got a deductible there if he ultimately has to have surgery of some sort I might I might make a claim under my homeowners insurance. That would be the difference of not going to workers comp But anyway, we could do a whole show on that In fact we have before on the difference between subs and employees and the danger of hiring people with cash But it happened to me two weeks ago, uh with a family member Who'll cross my fingers his physical therapy He should be back to normal no major surgery but if he has to go into major surgery and it's gonna cost I may have to Turn to my homeowner's insurance and if it was anyone else It could have been a lawsuit So yeah, of course, it is my brother-in-law. Maybe he'll still sue me I don't know we all yeah, I like that careful careful of all these admissions you just made you know Yeah from a legal standpoint. This is exhibit Yeah you're toast Um, hey, but it could happen to anyone and you know It's back in the day. I had a litigation case. I did do some personal injury cases at one point You know, I didn't chase ambulances. I'm more kind of like just following them around, you know Uh, i'm gonna pull up in your driveway. We got one here. Yeah. Yeah. I was just trying to go If one was swaying by I was like hey what's going on over here? Um So but I had this case of okay. This is an interesting one Um an employee at a company? Okay, it worked in a building that had stairs She fell down the stairs at the company, okay? And she was working and had significant long-term medical condition from it That had like nerve damage and like really serious stuff that was like forever. She was gonna have medical issues from And she was older she's maybe like well, I mean, we're like late 50s. Okay, and she's we You know I know 751 this year so matt's like she's older. She's in her 50s I'm, like, uh, excuse me anyways, so let's just say she was older. Okay. She was in her 20s All right, she wasn't spring chicken, okay so All right but Now here's what we did and this is this is matt personal injury lawyer. Okay, so I had my uh, So you represented the lady? Yeah. Yeah, this is like, yeah, so Um, well we didn't want workers comp case. Those are crap. You don't get paid very well from a plaintiff All right, and that's nice for you business owners. You want workers come because it protects you That's the only thing they can get is the workers comp insurance. Okay But if you're a plane if you're like well i'm barred there's it's capped and it's not great if you're an employee Well, what we did was we looked at who owned the building Who's maintaining the building? It was the business owner's separate entity That was owning the building and that we were able to sue And say well it was liability of the building not liability of the business And the building the entity that owned the building had the responsibility to maintain it and keep in good working order it makes you know and all this and so That arose a claim to kind of try to get around the workers comp But the point of that is is workers comp is a benefit to business owners. It really protects you from liabilities So if you have workers and you're doing the 1099 game, which is bad for taxes anyways Get them on as w2 make sure you got workers comp. We know it's a pain obviously It's a cost. If you're running a business in the long term, you're going to run into this issue and workers comp really protects you I love it. I I think that's um now some of you may say Well freak you guys set up my entity and set up an llc to own my building Are you telling me that doesn't protect me and all that? No It does Matt, couldn't get in this example saying matt's the attorney representing this woman that fell down the stairs He couldn't touch the business owner's personal residence their other investments their home their iras so there's still that barrier but I bet what happened is matt was able to tap into the building insurance Um, no one went out of pocket. I'm sure you know, that's Nine percent of these it's just insurance paying out and that it's probably the case am I guessing properly, right? right and you we would only know that there would only be the equity in the in the property itself, if we got anything at the llc after insurance and so So there's that liability protection, of course that we couldn't go after the business owners personal or other assets So yeah, so that's i'm not saying don't obviously do that structure. That's the benefit you want to use that structure. Yeah. Yeah so, um, but it's just a I was trying to show you want to have workers come. Okay, that's good. It protects you. Um And when you hire people to work on your home And I i'm going to call an audible and let's say let's skip the tax tip Let's stick with hsa, which is a tax tip in and of itself. Is that okay? Matt? Yep Um, so but let me finish with this point. I would say this it's very scary and precarious going down to the home depots of the world and Trolling the parking lot for someone that's going to do some day labor for you Nine times out of ten nothing will go wrong You get a great rate you get someone to move some trees load some crap and move it Yeah, but if anything goes wrong even in the transport of your stuff across town And something falls out of a truck and kills someone From a day laborer that you're hired to move stuff. You could be on the hook. And so Uh, like doing it yourself or hiring licensed insured Contractors to work on your home when there's a fear of a possible Accident, it's just it's just good practice. So yeah, that's why you see the license bonded insured okay, let's uh Let's hit hsa because you're right. This is A massive tax tip and it's the show we want to talk about it. Yeah, that's the main course today's Totally I mean, this is a chapter in my book tax legal playbook i'm looking at over here I may go grab a copy just to get a little You know Yeah Tax legal playbook stuff But here's the thing. I want that matt and I decided before the show we want to tell you how cool these are and how Anybody can have one whether you're employed or self-employed? And how easy they are to maintain and I guess transport with you or move with you wherever you go. They're not employer specific We'll get into all the details, but we want to tell you how amazing these are because they really are misunderstood underutilized In an incredible tax and wealth building strategy the number one cost of people in retirement And the number one reason people pull money out of retirement accounts is for health care And if we can get a jump on that and be proactive with the health savings account in some amazing ways as well we can be building wealth for the future specifically tied to Healthcare and so there's so much here. But anyway matt, I think that's probably where we go So let's make it sexy and how cool they are then. We'll tell you how to do it Um, which isn't that difficult, but you had some numbers too on some Stats, I thought we're in our stream Yeah, so there's 72 billion dollars in hsas right now that people put money into which is interesting There's about 30 million hsa accounts out there All right Now the average balance if you can do the math, there is 16 000 That's the average balance that someone has in their health savings account certainly lower than iras and 401ks But still pretty significant that the average balance is 16 000 um So I think there's obviously been 30 million americans who have been like hey this is a smart thing to do have a health savings account and let me tell you the number one reason why I think it's You should be doing it. We're gonna get into detail Above the line tax deduction. Okay. There's no income phase out no matter how much money you make, okay? In no matter amt or all the weird things you may have had in previous years You may be freaking out with biden's tax proposals. Okay? This has always been and always will be it's like the amount of republicans and democrats an above-the-line tax deduction You can get no matter your income. Okay? Now that's pretty awesome because a lot of people's health care expenses They're like i'm tracking all my health care expenses i'm gonna expense them Then you go to your tax attorney ticket your account and it's like well is this a miscellaneous itemized deduction? And you never get to take it even if you spend thousands on medical which we all do You get no deduction for it This is the one way to do it and if you just use this simple account You get it you get a deduction on on your health care and not even if you don't spend it it's just what you put in we'll get into all that but It's the one that should be on everybody's tax return I'd love it and i'm gonna make a list here of benefits and the list of drawbacks is Very few if any we're but we're glass half full kind of guys, but still, um, i'm going to make that list So now I want to clarify what map means by above the line just saying it a different way Bill gates could go open a a hsa account Now, I don't know if bill gates is over age 65, we'll come into some age things you can have an hsa that you've built over your lifetime, but once you turn age 65 You can't make new contributions. Another detail will come to you. That's probably one of the drawbacks In fact, let's come back to that in a little more detail You can still have it. You just can't think of it like a monopoly board You can go around the monopoly board and get 200 every time you pass go and every time you pass december 31st You can put new money in your hsa and we'll get to the amount but the important point that matt's making is Your income limit doesn't matter almost with every other deduction that is on your personal return you phase out you can't take the student interest deduction or the dependent for kid or the You know dependent care expense or a little bit all the miscellaneous phase out this and phase out that all those phase out things Do not apply So if you got the right type of insurance and we'll talk about qualification Then you've got the ability to take a ride off above the line before any other write-off huge Tell them the amounts man Oh, yeah, so now they actually just put out the 20-21 numbers. Can you believe it? 20-20. I mean it's been a tough year for a lot of people but Here's 2020 and i'll hit 20 21. Individual for 2020 you can put in 3550 Family which could be You and a child or you and a spouse is 7200. Okay, or sorry 7 100 for 2020. So 35.50 then basically, you double it for family 7 100. For 2021 depending when you're listening to this is 3 600 individual 7 200 family. Okay, that's how much you can throw in you're going to get a deduction whether you spend that money or not If i'm like if I throw in 7 200 bucks i'm getting a 7 200 tax deduction whether I itemize or not And I don't have to spend the money i'm getting the deduction regardless. Yes now. Oh this gets so good. By the way Here's my little promo Nice, it's the tax and legal playbook second show brought to you by mark. J kohler the author of the tax and legal playbook Yep, and endorsed by matt sorensen. Yep second edition. Thank you, man Uh get it on amazon get it over at markjor.com chapter 11 Is kohler care now, I joke around because of obamacare kohler care I go through nine Seven eight nine strategies one of them being the hsa And a lot of people don't do strategic planning in this healthcare arena because they think it's There's nothing there. There's nothing to be had but there's a lot and accountants. Don't talk about it enough now above the line 35 50 single 7 100 Family that could be head of household or married as long as you've got a dependent in your house. You're you're getting the family the third thing i'm gonna say is It it's not a user to lose it. Now that's important notice how matt said it's a savings account You can use it or keep it And wait till next year And we got to talk about last year but in a moment, but you can use it or keep it for the future And invest it another benefit Okay, I mean there's so much but this is not a user to lose a plan and so i'd like to point that out right now Not use it or lose it. It's yours and if you leave your employer And they threw some money in there for you. You take it with you This is like an ira for healthcare because it's an account that grows. Okay, there's mine now. Yeah Okay. Now it's kind of like an iron that you get a deduction. Okay, regardless of income though. Sometimes iras have income restrictions It you can invest it Oh, you're gonna go to investing. That's the next one you're going through then I'm, just giving a little teaser you can invest it and grow it. Okay um and This like like the average balance right now is 16 000 Well, most people are just saving it. Here's an interesting step only six percent of hsas actually invest their account 94 Just let it sit in cash because that's what most hsa administrators. Do you drop your money in? They just put in a savings account you get pretty much point zero zero zero one percent interest And they just want that money to sit there and then you pay it out for health care Yes, or you could be smart like six percent of people that have an hsa and actually invest it. I Like I did make that number four that was not a teaser. I like it matt. We call that number four So it's a savings account that you don't lose Uh if you don't use it And you can invest it now. We'll talk about another benefit of ways You can invest it down the road. That's like the creme de la creme strategy. That'll blow your brain You got to stick with us for that, but you can invest it Now that i'll give number five You can pull out money Any age any time for a qualified medical expense? And I and I I think the list of those qualified expenses is another benefit But i'm just gonna i'll let matt maybe tackle that one because he's got some cutting news on that Um, but i'll just say this you don't have to wait till you're 59 and a half You don't have to wait till you're 55 65 You can put money in today And reimburse yourself For medical expenses that you pay tomorrow or use a debit card A lot of times they can come with a debit card and just go use it to pay for medical expenses. So tax deduction Invest it tax-free And pull it out tax-free at any age. Did you hear that at any age? Yeah I know it's cool. And so um like i'll give you an example of different ways people use it and I think There's three different people who use an hsa or three different approaches on using an hsa Okay, there's one who likes to just contribute the money when they know they got a medical expense that's going to come out They're like, I don't really have the money to really save it. But I have medical expenses. I'm not going to get a deduction So let's say my kid's getting braces and it's going to be 3 000 bucks I don't wanna pay the three thousand out of pocket and get no deduction So i'm gonna put the three thousand in the hsa and then pay it directly out next week to the orthodontist for the braces I just got a three thousand dollar tax session because I put the money in the hsa It just happened to go right back out. So there's kind of like some people use it like that That's actually how i've used the hsa over the years. Okay? The second category is I want to save I know I got medical It may pop up or I may want to need it for the long term But i'm just going to put the money in and save it. I put my 7 200 or you know Or what is this first 71 or 35? 50. 100 for 2020. I put in my 7100 for 2020 And if I get medical that year i'll spend it out Otherwise the rest just saves up in the account and I got some for next year and then I just accumulate and save Okay, and then the third? Type of person of course is the contribute As much as you can if you use it, great, if not, the rest is invested Not just saving you're investing it that could be a brokerage account or that could be self-directing and real estate. Okay? Those are the three users. I think i'm going to give a fourth in here that i'd love matt and that is If you had an hsa last year You just have to open the account and we recommend to all of our clients at least have an account with 100 bucks in it And you're like well i'm short on cash right now Okay, cool And you have medical expenses you live in month to month and you forget to go down to the hsa I tell clients all the time. I think I have an hsa. I just haven't used it, right You can put money in today 7 100 And reimburse yourself for medical expenses that you incurred Anytime the hsa account was open. So as long as you have that account open You can go back and harvest i've had clients to go back Oh my gosh, i'm going to go back to the pharmacy find out how much I spent last year Go back to the dentist go back to here Run around town find three or four grand in expenses They've already paid for yeah, put the money in the hsa and take it right back out I mean a legal way to launder money goes in the hsa Comes right out. You just harvested a tax deduction And that's a misconception about hsa is a lot of people have had them with an employer And they got like a little debit card and they thought oh crap. I have to use the debit card And you're at the doctor or you've got prescriptions or whatever and you forgot the debit card and you think I can't use my hsa Oh, no, you could reimburse it in fact Directed ira where rhsa accounts are mostly invested when people take distribution like they don't have a debit card just submit your list Just give us the list add it up and we'll send you a check right out. It's not taxable Just give us a list of the qualifying medical expenses you're done. And so that's a great way to just And I think it's actually easier Is because you know, how many times you use that hsa card? You really want it in your pocket. Like, you know, my wallet is attached to my phone I don't got room in here for an hsa debit card Come on, I don't want to carry that sucker around when I remember i'm going to the doctor But it's easy just request the reimbursement. So yeah Now i'm going to say what i'm going to pick up on some words matt just said in his last rant We'll call it a rant Whatever. Um matt said qualifying expenses Now i'm going to list that as a benefit as well. The list is very robust generous kind Inclusive long, whatever you want to call it. Let's just go through it for a minute And and matt you be ready with the new law I'll let you do the new law okay for years you've been able to reimburse yourself for copays deductibles prescription drugs physical therapy massages, um eyes Dental i've got a couple clients right now, and it's I just got a ting of emotion I got to be careful. I can get very emotional that have two kids In rehab One for anorexia and one for some abusive prescription drugs and they are wonderful people and they're going through health You can use your hsa to pay for that No one I get a deduction if my kids or one of us is an institution or a rehab or some sort of facility psychotherapy counseling Uh, the list goes on and on those are all tax deductible expenses You can funnel through an hsa and then matt you said cares act Yeah, the cares act changed some rules permanently. This wasn't just like a 2020 change Okay, the cares act made some permanent changes back in march of this year on what qualifies they added. I'll just give you some Some quick ones. You probably didn't even think about Um, let's just call them feminine products. Okay Feminine products this for you know that time of the month those things now qualify, um tampons, you know pads stuff like that Um, so you can pay for that with your health savings account. Okay, um also certain over-the-counter Uh medications like tylenol, um any pain relievers or heartburn medication? Allergy relief. It's allergy seasons down here in arizona. I've like had to buy the flonase and all that stuff. That's would now qualify as of starting in 2020 So the list seems to keep expanding not contracting every year, which is a good thing making these hsas more and more powerful and it's interesting because In the political world. This is one of the things that you get republicans and democrats buying in on is health savings accounts so we like them for the long run because it just seems like The rules are going to get better Better to have better utilization of these and to allow you use it more as we just saw this year. Yeah It's huge um before we get to what I think is the grand finale the coolest thing you can do with an Hsa and i've got a real life example. I've been living for eight years with it is And matt and I have debated on this For years, I told clients before you even fund your ira fund your hsa Fund your hsa before now if you're going to get matching at work I'll say put your money at work and get the match You just doubled your money, even if you hate what they've invested in at work doubling your money is not a bad thing So if there's a match fine But matt's and i've gotten pretty heated at times saying you put it in an hsa before a roth In some ways I say, yes i'll give my argument is that you get the tax deduction And you can pull it out tax free immediately for health care. And again the big one is the number one reason for people going into bankruptcy And the number one draw out of their typical retirement account is for medical so why not invest and which is our grand finale here that how to invest it but Why not invest the hsa and fund it before you even do your roth? Because I think you're going to pull it out of an hsa before a rough That's my argument matt. What's your counter? Yeah, the one thing is i'm like I like this morning. I got off a call Um with someone who is going to use their roth ira On a commercial real estate deal that they were going to close in a short-term manner and make 1.5 million dollars in it Now would I rather have that 1.5 million drop in an hsa or a roth ira this person's in their mid-40s And for them, it's probably a roth ira. Do I am I going to have that much medical coming out? You know, so I don't want too big of an hsa Um, like whereas a roth ira like sky's the limit right that money comes out for whatever I want without taxes but um once I think Once you're at a couple hundred grand or a few hundred grand in hsa. I think you're at a good spot like that Could that cover a lot of expenses in retirement for your medical? Even your medicare premiums by the way, which is a little quick cool little tip Once you're at 65, you got to pay for medicare. I don't know if people knew that but You actually paid for that um and but you could use your hsa for that whereas you can't usually use their hsa to cover health insurance premiums except For that scenario anyways, little side note tip so Side of the table, I would say obviously the best thing is to do both You know if you can throw five grand at your roth and five grand at your hsa Even if you're just doing a little bit of a balancing act obviously that would balance in life That would be a great move. But I think a lot of people don't even think about it They don't even think about the hsa and they may go Blindly into the roth every year and the roth maybe already has enough money to snowball and invest Why not open the can on the hsa? So you're right. You are more likely to pull out money from the Hsa sooner you'll you'll usually hit that money before you hit the roth ira Yes, and you know obviously before 59 and a half because we all have medical. Yeah, so Now let's we i've we kind of glossed over this I want to say one thing to have an hsa You must have a high deductible health insurance plan. Okay, not everyone can just have an hsn. Hold it we're coming to the drawbacks Oh is this driving at the very end? Okay. Well now one more time the roth ira because not everyone can just You could do a roth ira. Whereas you may not qualify for this. Oh, okay fair enough. Yeah. There's a little more qualification for an hsa which we're going to come to I just wanted to say the creme de la creme benefit of an hsa And I want matt to be the one to share this because this is his forte Yeah, and he just said a minute ago, and I know some of you rolled your eyes matt just off the cuff goes Yeah, I think if you had a couple hundred grand in your hsa, you'd be fine. Some of you were going Uh, what the hell are you talking about 200 grand in nhsa. I thought the contribution was 7 100 bucks What are you smoking medicinal marijuana? No, which is not deductible in an hsa because it's under the federal list. Yeah, it's not a qualifying You know, you've got a prescription for it. So not qualifying. Yeah, so write your congressman on that one um Here's one though, I think. Okay. Let's hit that topic. Okay, I appreciate you teaming up for me um Or maybe slow pitched that you know, like slow pitch or coach pitch or like first, baby Coach pitch. Yeah, probably t-ball Okay. So, um You can when I said you can invest it, right Okay, you can just throw your 7 100 in there and just let it sit in a savings account or you could invest it now you could just buy stocks if you wanted or what our clients are doing at directed ira is they're Making self-directed investments. They're investing into small businesses. They're buying real estate They're lending the money out I just did an hsa transactions minute ago for a client that put in money into a private placement into a real estate fund that's buying an apartment building and they just use their Hsa to buy a chunk of this Partnership this little llc. That's buying. Uh, it's a real estate apartment fund and so they didn't want to just go buy You know microsoft or publicly traded stock. They wanted to invest in something they knew and so You can do that with your health savings account. Um mark's done it He's got his own. He's got a rental property. Yeah example number two right here living the dream is i've got my um, hsa that Owns an llc Um, I will say in the state of illinois And I own a rental property. It's the cutest little meth lab. I mean, it's just adorable guys are great lots of bling but you know I call them entrepreneurs. They really are they're just great guys, very helpful kind Um, they pay their rent every week in a you know a paperback But anyway, um, okay i'm being a little facetious but it is a section eight guaranteed rent from the government It's a little rental property for 40 grand. I bought in my hsa about seven eight years ago cash flows a couple hundred bucks a month That llc doesn't even file a tax return I don't pay any taxes on that revenue So when matt said you can invest it That means invest it tax-free. And then when you pass go again next year, you can put another seven grand and change in it So you're pat, you're stopping at park place. You're stopping at baltic avenue, and you're Investing along the way making as much money in your hsa as you can or you want buying bitcoin for crying out loud And then you come back around full circle and Your hsa is there and growing rapidly and you can still pull it out for medical. I can go to my llc For my hsa and pay for dental expenses Done. There's no there's not even a tax return required. It's crazy. So good stuff Yeah, so that's pretty cool um, and I think a lot of people just never knew you could do that and even people who self-direct That self-direct through iras. A lot of them are surprised. I can actually self-direct an hsa too. Yeah. Yeah and your comfortable education account There's a lot of other things you can self-track you may not know about All right. Now, let's get to the downside and the good news is there's not that many but there are some things to know Okay, I don't you know We're straight shooters. All right And I was I was bumping into this one as mark said the hsa is better in the roth ira. Okay. Um There is a qualification to have an hsa You must have a high deductible health plan. What's high deductible high deductible is 1400 individual or 2 800 family okay, so you must have a deductible of 200 for a family plan or 1400 individual some other things that technically fall into that like Certain minimum coverage of things and like that Expenses, but essentially it it's those deductible limits of 1400 individual 2800 family. Yeah and I was just looking at my list here too, and I would say this If your employer Is covering your health care? And this is where our recommendation or strategy is for clients if you're generally healthy What the freak you've got this hmo juice it up five dollar copay plan that you don't even use When your employer is reaching out for that enrollment period say hey Uh, i'm a pretty healthy family guy gal. I'd like to just do a high deductible plan Most of the employers are like, please that sounds great Thank you Because they're going to get a lower premium from their coverage or carrier Because a high deductible plan means you're going to go to the docks less um and so in general Or you're going to pay less that when you go, yeah Like you're going to pay out of pocket the insurance company's going to pay less so they give you a little bit. That's right they're going to pay less the insurance company is going to pay this and so So anyway, you can go request from your employer a high deductible plan for those of you of you that are self-employed You can still get an obama qualifying plan. I to use that term like, uh, lightly i'm not trying to Dis on obama, I was grateful he went up against the insurance companies. I consider them, you know satan's, you know spawn, you know the insurance company, but I just uh, but You control the game. That's the beauty of this. It's your insurance plan Go to your employer ask to have it increase the deductible. Make sure it qualifies for an hsa. That's the biggest hurdle um And the first step really and you can go open your own hsa anywhere you want. Let me just open the door for that So matt first i'll say this just make sure you have the right plan. Choose it find it change it whatever it takes Freaking go for it. And then If you have an hsa with your employer like your employers like yeah Here's who we use and you've got some cash accumulated over there They're like now they'll only let me like save it. I can't invest in anything You're like I want to self-direct you can transfer over that cash It's not like your 401k with your current employer that's locked down That hsa can be moved to another hsa so you could transfer it over Let's say to direct an ira if you wanted to self-direct it So just keep that in mind, so you're not held hostage like your 401k can be with your current employer on your hsa yeah, and that leads to The account that you open whether your employer created one for you or not. And if you're self-employed you go Well, where do I open my hsa do I call my insurance company? No, see that's the distinction here The insurance is your insurance company. The hsa is a financial institution and so it directed ira we made sure when we went through all of our uh, Gosh the paperwork to get approved and to be a trust company and with the banking arizona banking commission everything we wanted an hsa feature so that you could open an hsa account and self-direct it So it directed ira you can go online day or night and go click. I want an hsa open the account And transfer money into it or make your contribution now clarify Just because the contribution's 7100 that doesn't mean 7 100 per account You've got 7 100 in chips to distribute so you can put 3 grand in chips at the employer's place get some matching or whatever or they might put in a thousand for you That goes against your 7100 then you go to your other hsa accounts and tap out the rest to get to 7100 yup, exactly Okay other downsides to hsa. I mean there's an account fee. I guess i'm trying to think what else are the downsides? Um, yeah And see if you have a typical stock broach account The reason why people call it a savings account is because they're making money on your money They're making the money. Yeah, they're not paying you interest if anything and so When you self-direct you go. Oh I gotta account for a few hundred bucks. Every year look Yeah, because now you've got green light to invest in whatever the hell you want That's that's a good thing Uh, you could look at it half full half empty an age problem um once you turn 55 I guess that we oh We didn't even hit that as a benefit when you turn 55, you can put an extra thousand in whether you're single or family so it goes from 35.50 to 36.50 or 70 or 8100 this year. I'm, sorry 45.50. Yeah, I said it right or 8 100. And then You can put that extra money in for 10 years and get a write-off for it. But at age 65 no more pass and go You're working with the money that's in there But if you've been doing this for 10 or 20 years, you got a good little pot of money going All right, you maybe got it invested and it's grown as well And so I think a lot of people think oh, well, i've what can I do with 7 100 bucks right throw that? No, you're doing this for 10 or 20 years. This is a strategy where you're only putting in 7 100 bucks There's another way to look at this but at the end if you're doing it over and over and consistent with it Which is what we see with people that have successful accounts that have really saved well for retirement. They've been consistent they've been maxing out all of a sudden they get to age 65 and they're Like i'm ready, you know, I don't have to stress. I've got the big hsa. I've got the big retirement account. And so Just keep growing it know that it's not just what you put in you can invest it and and Of course have an ex account much larger than what would just be 7 100 bucks tacking up each year And um, there's so many things you're going to be able to use it for yeah later on I mean, I want to find any bad. So no one's surprised I got one more too, I guess like okay, the one bad one i'd say is if you're going to self-direct The account is typically not as accessible You're not going to have a debit card and go down and split your groceries into two carts And some people have asked that well if over-the-counter certain over-the-counter drugs are hsa qualifying but others aren't what i'll have people do is if they have an Hsa that has a debit card with it they'll put you know a separate spot in the shopping cart for those items and let the hsa pay for it, but If you're going to self-direct the pain by the way, I don't love that. I don't love the hsa debit card It's kind of turned in the way that you use an hsa. But I think it's backwards It's like just add up your medical at the end of the year and get a reimbursement from your hsa account I like it. I like it It's those that have more cash flow challenges that having that debit card george costanza that have the massive wallet like this thick You know Like half a half a foot long That have like every card and receipt in there for the they're the ones that will have an hsa card on them at all times yeah, yeah and But I will say if you do even want to reimburse yourself once a year, whatever it is It takes an extra step or a few days or whatever It is to reimburse yourself if you're going to self-direct But again in that mode you want to leave it there as long as you can you're in vegas I don't know which game it is where you say let it ride. Is that craps? Would you say let it ride? I don't know because on roulette you got it wrong. We're Matt and I are only good at roulette. It's really easy. Oh, I have to choose a number there Yeah, and it's and the odds are all the same. You know what I mean? It's like I I can make different bets on a craps table, but I have no idea what i'm doing. I think it's but you're really Like there's the dumb guy over here Just take his money just pickpocket him right now save him this misery. Um, but You're gonna let the money ride. And so some may say it's not a drawback. In fact, it's a motivator to leave it alone Um, and and so that's that's a good thing. But some say access is difficult. What was the other one? You said was bad last one The only other thing i'll say is on the bad list is when you need to get money out. There's a penalty If you want to pull money out for non-medical expenses for non-medical, okay? Non-qualifying medical expenses. It's a 20 penalty and plus You take it into income and it's taxable Like where iras informal because you got a 10 percent earned withdrawal penalty and take it into tax. Okay hsa 20 and take it into tax. So that's it's punitive of course, so Okay now but that opened the door for we got 10 benefits and i'm going to read them off But the number 10 we forgot another benefit if you don't use it for medical You can pull it out like a regular ira at 59 and a half. No penalty. Just pay the tax And if you die, it rolls into your spouse's hsa If you and your spouse die, it goes into your kid's ira. So there's like This is sweet. And so we forgot to mention that is the ira inheritance or use inheritance Yeah, i'll call it that Okay So i've got ten benefits and one two three four five drawbacks Do you to hear him? I like it. I like it. Yeah, okay. All right. So here's the drum roll folks Oh say, can you see okay. Sorry this house christmas vacation, you know. Oh, okay. I was Okay, drum roll, please rusty. I need your terminal. Okay I don't know what happened. I checked every light. Did you check every light? Okay, see we got to get a movie quote in today because yeah, I got a point for that matt didn't bring one movie quote In today I did so i'm just so far So and when you can quote, you know clark w griswold. You're it's a good day. Okay benefits above the line deduction No income phase out It's a deduction of 35.50 or 7100 or 45.50 or 8100. We'll come to that is another benefit No Not a user you lose or lose it plan it grows as a savings account bare minimum number four, you can invest it and grow it Five you can pull it out tax free for a long list of medical expenses Number six You can go back and reimburse yourself for prior medical expenses As long as the account was open didn't have to have money in it. Just had to be open uh You can fund this in conjunction with your retirement accounts and be strategic about it between roth and hsa and make sure your your Investment portfolio mix includes an hsa. I put that as a benefit. Maybe that's a stretch I can Play with that. I like it though. Okay, um Nine or no eight you can um, if you're age 55 to 65 you can put in the extra thousand um Or is that seven eight nine and then nine was self-direct So I can grow this thing rapidly with greater rates of return and then 10 was an ira um User inheritance. I've actually got 12 here, but I was trying to cram them into 10 This would be in my article. I do I try to do a corresponding article with all of our Videos and podcasts. So look at to that the bad was if you're over age 65 no new contributions Must qualify number two with a high deductible plan three Um, there's account fees if you want to self-direct Or you don't get any interest at all, if you want the bank to make money on your money four access could be Uh a challenge it depending on the situation and number five if you use it for non-medical expenses There's a 20 penalty and taxes on that withdrawal There you go the hsa That is the health savings account All right, I hope Some of you may have already been a little expert in a health savings account some of you have one maybe even some of you are actually self-directing it but hopefully for those of you that wanted the full spectrum You know overview this has been helpful. We can help it directed ira. Of course We can just help if you need some consulting in the law firm or accounting firm, but we're here for you We want to be a resource like mark said we've got a lot of other content The tax legal playbook's got an entire chapter on it Okay Also go to directed ira right now tonight Open your hsa account pay the fee out of your own pocket done. You don't have to do it through the hsa You now have until april 15th Of 2021 to make your contribution for this year And even if you don't have the right type of insurance, it'll motivate you to get the right type of insurance And get the insurance in december or november or whenever your enrollment period is number one. Yeah Yeah, and you can still make a 2021 contribution You might be able to roll over money from an old employer's hsa But get the account going because if you do fund it in january for 2021, you can go back and reimburse yourself now So it's almost like you're paying insurance To get that deduction in 2020 with 2021 money if you have to so directed That strategy to get the 2020 expenses covered and be able to be reimbursed Until 2021 so I like it a great little tip way to close it out. I mean That should let me pen drop There you go. I didn't even think of that. Okay Well, uh, thanks everybody. We're gonna have a special show next week. Yep, make sure you're staying tuned to that Okay, we've got some announcements on the podcast and some plans we've got moving forward. But um, thanks of course for listening to today Um, you know where to find us. We've been dropping the names We'll of course. See you next week See you Thanks for listening to another hour of refreshing strategies to better live your american dream don't forget to get your free copy of mark and matt's ebooks and sign up for their weekly free newsletter with important tax deadlines and articles at refreshyourwealth.com
