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What Does Tax-Free Mean?

Learn what tax-free means in this Howcast finance video with expert Gregory McGraime.


With most investments if you earn some interest or dividends, or you're buying or selling stuff, you often have to pay tax on your gains each year when you're doing them, but there are some types of investments or accounts that you can use that provide tax free growth. That means you earn some type of investment return and you don't have to pay any taxes at all on it. I know it probably sounds too good to be true, but let me give you a couple examples. If I bought a regular bond and I earn some interest on that bond, I have to pay taxes on it, but some bonds, like municipal bonds, might be tax free, and might provide tax free income, depending on where the bond is from, and where I live. And, so investing in municipal bonds might be a way to invest, and really earn some tax free interest. Another way to invest with tax free money is with a rough I R A, or rough 401K, where you put money in, that money is growing and as long as you meet certain conditions you can take all that money out of those accounts and never pay taxes on any of that growth or the principle you put in. Taxes is one of the biggest expense most people have and if you can find a way to invest in a tax free type of investment you can really accelerate your growth and accumulate that much more money for your future.

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