Quiz Understanding the Financial Planning Certification Exam Part 1 Lesson 8
1. What is one of the common choices for saving money for children’s educational expenses?
A) 401(k) account
B) Roth IRA
C) Coverdell education savings account
D) Health Savings Account (HSA)
2. What is a benefit of a Coverdell education savings account?
A) Contributions are tax-deductible
B) Growth is tax-deferred
C) Contributions are not taxable
D) Withdrawals are subject to a 20% penalty
3. What expenses can a Coverdell account be used for?
A) Groceries
B) Tuition and school supplies
C) Entertainment and travel expenses
D) Restaurant meals
4. How much is the annual contribution limit for a Coverdell account per beneficiary?
A) $500
B) $5,000
C) $10,000
D) $2,000
5. What happens if you withdraw money from a Coverdell account for non-educational expenses?
A) No penalty
B) 10% penalty on the growth
C) Tax deduction
D) Tax credit
6. How are contributions to 529 plans treated for tax purposes?
A) Tax-deductible at the federal level
B) Tax-deductible at the state level
C) Tax-deferred growth
D) Taxable as income
7. What is a key difference between Coverdell accounts and 529 plans?
A) Coverdell accounts have higher contribution limits
B) 529 plans are state-managed
C) Coverdell accounts have no age restrictions
D) 529 plans can only be used for post-secondary education
8. What can a Coverdell account be rolled over into?
A) Traditional IRA
B) Health Savings Account (HSA)
C) 529 plan
D) Roth IRA
9. What is an Able account?
A) A retirement savings account
B) A tax-advantaged savings account for individuals with disabilities
C) A health insurance plan
D) A college savings account
10. What is a benefit of an Able account?
A) Tax-deductible contributions
B) Tax-free growth
C) No contribution limits
D) Eligibility for Social Security and Medicare benefits
11. Which tax credit provides up to $2500 per eligible student for the first four years of post-secondaryeducation?
A) Lifetime Learning Credit
B) American Opportunity Credit
C) Education Expense Credit
D) Tuition Assistance Credit
12. What is required to receive the full Lifetime Learning Credit?
A) Adjusted gross income under $50,000
B) Adjusted gross income under $100,000
C) Adjusted gross income under $80,000 (single) or $160,000 (married filing jointly)
D) Adjusted gross income under $200,000
13. What expenses qualify for the Lifetime Learning Credit?
A) Tuition and fees for any post-secondary education only
B) Any educational expenses including tuition, fees, and room and board
C) Educational expenses for K-12 education only
D) Educational expenses for vocational training only
14. What is included in calculating modified adjusted gross income?
A) Deductions for IRA contributions
B) Interest from savings accounts
C) Rental income
D) Child support payments
15. How are contributions to 529 plans treated for tax purposes?
A) Deductible at the federal level
B) Deductible at the state level
C) Tax-deferred growth
D) Taxable as income
16. What is the maximum annual contribution limit for an Able account?
A) $10,000
B) $20,000
C) $5,000
D) It varies by state
17. What is one restriction on the use of Able account funds?
A) Can only be used for medical expenses
B) Can only be used for education expenses
C) Cannot exceed the annual contribution limit
D) Must be used within 10 years
18. What distinguishes a Coverdell account from a 529 plan?
A) Coverdell accounts have higher contribution limits
B) 529 plans have age restrictions
C) Coverdell accounts are state-managed
D) 529 plans have more investment options
19. What happens if funds from an Able account are not used for qualified expenses?
A) No penalty
B) 10% penalty
C) 20% penalty
D) 30% penalty
20. Which tax credit offers up to $2000 per tax return for education expenses?
A) American Opportunity Credit
B) Lifetime Learning Credit
C) Education Expense Credit
D) Tuition Assistance Credit
Quiz Understanding the Financial Planning Certification Exam Part 1 Lesson 8
Answer Key:
1 What is one of the common choices for saving money for children’s educational expenses?
Answer: C) Coverdell education savings account
2 What is a benefit of a Coverdell education savings account?
Answer: B) Growth is tax-deferred
3 What expenses can a Coverdell account be used for?
Answer: B) Tuition and school supplies
4 How much is the annual contribution limit for a Coverdell account per beneficiary?
Answer: D) $2,000
5 What happens if you withdraw money from a Coverdell account for non-educational expenses?
Answer: B) 10% penalty on the growth
6 How are contributions to 529 plans treated for tax purposes?
Answer: B) Tax-deductible at the state level
7 What is a key difference between Coverdell accounts and 529 plans?
Answer: B) 529 plans are state-managed
8 What can a Coverdell account be rolled over into?
Answer: C) 529 plan
9 What is an Able account?
Answer: B) A tax-advantaged savings account for individuals with disabilities
10 What is a benefit of an Able account?
Answer: D) Eligibility for Social Security and Medicare benefits
11 Which tax credit provides up to $2500 per eligible student for the first four years of post-secondary education?
Answer: B) American Opportunity Credit
12 What is required to receive the full Lifetime Learning Credit?
Answer: C) Adjusted gross income under $80,000 (single) or $160,000 (married filing jointly)
13 What expenses qualify for the Lifetime Learning Credit?
Answer: A) Tuition and fees for any post-secondary education only
14 What is included in calculating modified adjusted gross income?
Answer: A) Deductions for IRA contributions
15 How are contributions to 529 plans treated for tax purposes?
Answer: D) Taxable as income
16 What is the maximum annual contribution limit for an Able account?
Answer: D) It varies by state
17 What is one restriction on the use of Able account funds?
Answer: B) Can only be used for education expenses
18 What distinguishes a Coverdell account from a 529 plan?
Answer: D) 529 plans have more investment options
19 What happens if funds from an Able account are not used for qualified expenses?
Answer: B) 10% penalty
20 Which tax credit offers up to $2000 per tax return for education expenses?
Answer: B) Lifetime Learning Credit
End Of Quiz Understanding the Financial Planning Certification Exam Part 1 Lesson 8
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