Finance and Taxation Quiz

Federal Insurance Contributions Act (FICA)

• FICA tax is paid equally by employer and employee.

Capital Gains

• A capital gain occurs when an asset is sold for more than its purchase price.
• Selling an asset for less than its purchase price does not result in a capital gain.

Charitable Contributions

• Contributions to a tax-deductible charity can reduce taxable income.
• The amount saved in taxes is dependent on the marginal tax bracket.

Tax Deductions

• The standard deduction is an alternative to itemized deductions.
• Tax credits reduce tax liability.

Mortgage Payments

• At the beginning of a loan, most of the monthly payment goes towards interest.

Life Insurance

• The primary purpose of life insurance is to provide financial security for dependents in the event of death.
• The needs analysis method is the most accurate way to determine the amount of life insurance coverage needed.
• A loan-to-value ratio of 80% or less is usually required to avoid private mortgage insurance (PMI).

Insurance

• Long-term care insurance helps with nursing home or in-home care due to chronic illness.
• Disability income policies usually have a waiting period before benefits are activated.

Credit Cards

• Interest charges can be avoided by paying the account balance in full every month.

Investments

• Loan maturity affects monthly payments and total finance costs.
• Mutual funds provide diversification of invested funds.
• The net asset value is the current market value of all securities a mutual fund owns, less any liabilities, on a per-share basis.
• A sector fund invests only in a particular industry.

Retirement Plans

• Vesting refers to the process of earning ownership of retirement plan benefits.
• Defined benefit plans are becoming less common.
• Withdrawals from pension plans before age 59½ may incur a 10% federal income tax penalty.
• The annuity disbursement option affects the size of monthly payments.

Test your knowledge on finance and taxation with questions about the Federal Insurance Contributions Act (FICA), capital gains, and more.