Blog – Paces Ferry Wealth Advisors

Get the Most Out of Your Home Purchase with These Tax Tips!

Written by Zachary Morris, CFP® on February 15, 2025.

In this video, I share a tax-saving strategy that allows you to maximize deductions when purchasing a home. If you’re looking to optimize your tax benefits, understanding the difference between mortgage interest deduction and investment interest deduction is important to effectively execute this strategy. The mortgage interest deduction is limited to loans of $750,000 or less under current tax laws, often leaving homeowners with unused interest expenses that don’t qualify for tax deductions.

However, by utilizing a cash-out refinance and adhering to IRS interest tracing rules, you may be able to classify your loan interest as an investment interest rather than a mortgage interest. This method could let you deduct the full amount of interest paid, potentially avoiding the mortgage interest deduction cap.

I explain the process of refinancing your home and using the loan proceeds for investment purposes like stocks, bonds, mutual funds, or ETFs.

Part of the success with this approach is keeping the loan proceeds exclusively for investment purposes. Using the funds for personal expenses like buying a car could disqualify you from some of the tax benefits. It’s important to track the use of your funds and properly report everything to stay compliant with IRS rules.

How Can You Maximize the Benefit from Your ISOs?

Written by Zachary Morris, CFP® on February 10, 2025.

If you’re holding Incentive Stock Options (ISOs) and wondering how to exercise them strategically to minimize taxes, you’re in the right place. In this video, I’ll explain the key factors that can help you maximize your tax advantages, such as achieving a qualifying disposition and understanding the Alternative Minimum Tax (AMT).

Unlike other stock options, ISOs are a powerful wealth-building tool, allowing you to defer taxes until later stages. To make the most of them, it’s crucial to understand the rules for exercising and the holding periods required for long-term capital gains tax treatment.

I’ll guide you through the process, including how to avoid short-term capital gains tax and AMT by holding the stock for the appropriate duration. Additionally, we’ll discuss vesting schedules and why timely exercise can be important to preserve your compensation if you leave the company.

By the end of this video, you’ll know when to exercise your ISOs, how to time your sale to potentionally optimize tax benefits, and how to collaborate with your CPA to avoid costly tax mistakes.

Exercising ISOs can feel complex, but with the right knowledge and strategy, it’s an effective way to build wealth and reduce taxes. While consulting a tax advisor is essential to tailor strategies to your unique situation, this video will provide the foundation you need to take control of your stock options and minimize tax liabilities.

WHAT You Need to Know About RESTRICTED STOCK UNITS EXPLAINED!

Written by Zachary Morris, CFP® on February 5, 2025.

In this video, I’ll break down everything you need to know about Restricted Stock Units (RSUs)—how they work, their tax implications, and when it makes sense to sell them. RSUs are a form of compensation provided by companies, offering employees shares of company stock once certain conditions are met—typically through a vesting period tied to continued employment. Unlike stock options, RSUs don’t require you to purchase shares. Instead, you automatically receive the shares once they vest, making them an attractive tool for building long-term wealth.

If you’ve received RSUs as part of your compensation package, it’s critical to understand how they are taxed at both the vesting and sale stages. This video also covers strategies for deciding when to sell your RSUs to avoid unnecessary taxes and market risks, helping you maximize this form of equity compensation.

I’ll also walk you through how RSUs work in a public company and the steps required to meet eligibility through vesting schedules. We’ll explore the difference between ordinary income tax and capital gains tax and when each applies. Additionally, I’ll provide practical recommendations on when to sell your RSUs based on market conditions and your financial goals. Timing is essential to avoid tax pitfalls, and with the right approach, RSUs can become a powerful part of your wealth-building strategy.

Is Roth 401k Really Better Than Traditional for Your Retirement?

Written by Zachary Morris, CFP® on February 1, 2025.

In this video, I’ll explain the key differences between a Traditional 401(k) and Roth 401(k)—two popular retirement savings options offered by employers. Understanding how these accounts differ can help you make smarter financial decisions and optimize your retirement savings strategy. Both plans offer tax advantages, but knowing which one suits your situation depends on when you want to benefit from those tax savings—now or later.

The Traditional 401(k) allows you to make pre-tax contributions, reducing your taxable income today. However, withdrawals in retirement will be fully taxed as ordinary income. On the other hand, the Roth 401(k) uses after-tax contributions, meaning you pay taxes upfront. But in retirement, your withdrawals—including any growth—are tax-free. Choosing the right plan can impact your future income, so understanding these distinctions is crucial.

We’ll walk through the tax benefits of both Traditional and Roth 401(k) accounts and help you understand which option might work best for your financial goals. I’ll discuss how contributions are taxed under each plan and explain the impact on your paycheck today vs. income in retirement. You’ll also learn which type of account may be better based on factors like your income bracket, future tax expectations, and retirement timeline. Whether you’re early in your career or close to retirement, I’ll provide quick insights to help you decide the best way to save.

Can Small Business Owners REALLY Achieve Financial Freedom?

Written by Zachary Morris, CFP® on January 15, 2025.

As a small business owner, have you ever wondered, “How much do I need to sell my business for to retire comfortably?” In this video, I’ll guide you through the essential steps to calculate your number—the amount you need from the sale of your business to achieve your retirement dreams.

Planning for retirement as a business owner is different. Unlike traditional employees, your business is likely your largest asset—and your key to financial freedom. But how do you bridge the gap between your business’s current value and your ideal retirement target? That’s exactly what we’ll cover.

I’ll show you how to determine your “number” by considering factors such as your desired lifestyle, anticipated expenses, and current savings. I’ll also discuss strategies to increase your business’s value to close the wealth gap.

Building a strong team of financial advisors, CPAs, and legal experts is critical to navigating the complexities of a business sale and ensuring a smooth transition to retirement.

Whether you’re planning to sell in 2 years or 20, running your business with a buyer’s perspective will ensure you’re ready when the time comes. If you’ve ever felt unsure about whether your retirement goals are achievable, this video will provide clarity and direction.

Are You Making This COSTLY Backdoor Roth Mistake?

Written by Zachary Morris, CFP® on January 10, 2025.

If you’re planning a Backdoor Roth IRA conversion, understanding the pro-rata rule is crucial to avoid unexpected tax bills. This often-overlooked rule can significantly impact your retirement strategy, especially if you have pre-tax funds in any of your IRAs.

In this video, I explain the complexities of the pro-rata rule and how it can affect Backdoor Roth conversions. I’ll start with the basics of IRA contributions, breaking down how pre-tax and after-tax contributions differ. Understanding this distinction is key to helping your conversion go smoothly and minimizing additional taxes.

Additionally, I’ll guide you through the mechanics of Backdoor Roth IRAs, a strategy often used by high earners who exceed Roth contribution limits. You’ll learn to move after-tax contributions from a traditional IRA into a Roth IRA while avoiding unnecessary tax liabilities. Keeping track of your contributions and knowing the difference between pre-tax and after-tax funds is essential for creating a tax-efficient retirement strategy.

The pro-rata rule’s impact is also explored, especially how it applies across all your IRAs, even those held at different financial institutions. Using a practical example of $93,000 in pre-tax funds and a $7,000 Roth conversion, I’ll show how the IRS calculates taxable income during conversions. By understanding this rule, you can optimize your IRA transactions and avoid paying taxes on more than you need, helping you reach your retirement goals more efficiently.

The 4 Best Ways to Save for Your Child’s Future: Pros and Cons Explained

Written by Zachary Morris, CFP® on January 5, 2025.

In this video, I’m breaking down four popular ways to save for your child’s future—from college savings to long-term investment accounts—and weighing the pros and cons of each. If you’re exploring options for your family, understanding these choices can help you create a plan that aligns with your goals and your child’s needs.

We’ll discuss 529 plans, UTMA accounts, Roth IRAs, and Joint Accounts, covering their unique features and tax benefits, along with any potential drawbacks. From education savings to general-purpose funds, you’ll get a clear picture of which option might work best for your family’s needs.

We’ll explore how a 529 plan can optimize college savings, the flexibility of UTMA accounts, the retirement potential of a Roth IRA for kids, and the simplicity of Joint Accounts. Each has its own purpose and tax implications, so you can make an informed decision about what works best for your family.

4 Savings Options for Your Child’s Future:

529 Plan:
A 529 plan is a tax-advantaged savings account specifically for education expenses, allowing your investments to grow tax-free if used for qualified expenses. This is a great choice for college savings, though it does limit funds to educational purposes, and using funds for non-qualified expenses may incur penalties.

UTMA Account:
A UTMA (Uniform Transfers to Minors Act) account allows you to transfer assets to a child, which they gain control over at a certain age. These accounts offer flexibility in spending, so the funds aren’t restricted to education. However, since it’s in the child’s name, it may impact financial aid eligibility.

Roth IRA:
A Roth IRA for kids allows you to save for their future retirement by contributing earned income to this tax-advantaged account. This is a long-term savings strategy that grows tax-free. While it provides excellent retirement benefits, accessing the funds early may result in taxes and penalties.

Joint Account:
A Joint Account lets you and your child share an account for general savings or future expenses. It’s easy to set up and allows full control, but unlike other accounts, it doesn’t come with specific tax advantages or protections, which may limit its growth potential.

Tax-Efficient Gifting: Strategies to Share Your Wealth with the Next Generation

Written by Zachary Morris, CFP® on January 2, 2025.

Learn about tax-efficient gifting strategies, including annual exclusions, 529 plans, and direct payments, to enhance your estate planning

Are you concerned about your estate being subject to federal estate taxes? Or perhaps you’d like to see your loved ones benefit from your wealth during your lifetime rather than after you’re gone? If so, you’re not alone. Many individuals seek ways to pass wealth efficiently to the next generation while addressing the complexities of estate taxes.

In this article, we’ll explore multiple strategies for transferring wealth in a tax-efficient way. These approaches align with current laws and exemptions and aim to preserve as much of your estate as possible for your beneficiaries.