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Quizzes > Quizzes for Business > Finance

Tax-Advantaged Accounts Knowledge Test Quiz

Sharpen Your Understanding of Tax-Advantaged Savings

Difficulty: Moderate
Questions: 20
Learning OutcomesStudy Material
Colorful paper art depicting a trivia quiz on Tax-Advantaged Accounts Knowledge Test

Ready to test your expertise with a tax-advantaged accounts quiz designed for finance enthusiasts and students? This Tax-Advantaged Accounts Knowledge Test covers key retirement savings tools like IRAs, 401(k)s, and HSAs to boost practical understanding. Assess your broad tax know-how with the Tax Knowledge Assessment Quiz or dive into specifics with the Retirement Tax Knowledge Quiz. Every question is editable in our user-friendly editor, allowing you to tailor the practice to your learning goals. Explore more quizzes to expand your mastery of tax topics.

Which retirement account requires after-tax contributions but allows qualified withdrawals to be tax-free?
401(k)
Traditional IRA
Roth IRA
Health Savings Account (HSA)
Roth IRA contributions are made with after-tax dollars, and qualified withdrawals in retirement are completely tax-free. Traditional IRAs and 401(k)s offer tax deferral, while HSAs are for medical expenses.
What type of account is specifically designed to cover qualified medical expenses and offers triple tax advantages?
Roth IRA
529 College Savings Plan
Health Savings Account (HSA)
Traditional IRA
An HSA provides tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical costs. No other account combines these three benefits.
Which tax-advantaged account is primarily intended for education savings?
Health Savings Account (HSA)
529 College Savings Plan
401(k)
Traditional IRA
A 529 plan is designed specifically to save for qualified education expenses at eligible institutions. Other accounts serve retirement or medical needs.
Which of the following accounts often includes employer matching contributions as a benefit?
Traditional IRA
401(k)
Health Savings Account (HSA)
Roth IRA
Many employers offer to match a portion of employee contributions to a 401(k) plan, boosting retirement savings. IRAs and HSAs do not feature employer matches.
Contributions to a Traditional IRA may be tax-deductible depending on income and what other factor?
Credit score
Home ownership status
Number of dependents
Participation in an employer retirement plan
Deductibility of Traditional IRA contributions depends on income level and whether the taxpayer or spouse is covered by an employer retirement plan. Other factors like dependents do not affect it.
At what age can you take distributions from a Traditional IRA without incurring the 10% early withdrawal penalty?
59½
65
62
55
IRS rules allow penalty-free withdrawals from a Traditional IRA beginning at age 59½. Withdrawals taken earlier may incur a 10% penalty unless an exception applies.
Which of the following factors does NOT affect eligibility to contribute to a Health Savings Account (HSA)?
Household income level
Coverage under any other health plan
Being enrolled in Medicare
Enrollment in a high-deductible health plan (HDHP)
HSA eligibility depends on HDHP enrollment, lack of other disqualifying coverage, and not being in Medicare. Income level does not restrict HSA contributions.
What penalty does the IRS impose for failing to take a required minimum distribution (RMD) from a Traditional IRA?
25% excise tax
10% excise tax
50% excise tax
100% excise tax
If you fail to withdraw the RMD amount from a Traditional IRA, the IRS charges a 50% excise tax on the portion not withdrawn. This penalty is among the highest excise taxes.
Which type of IRA is not subject to required minimum distributions during the original owner's lifetime?
SEP IRA
Traditional IRA
SIMPLE IRA
Roth IRA
Roth IRAs do not require RMDs during the account owner's lifetime, whereas Traditional, SEP, and SIMPLE IRAs do impose RMD rules.
How long must a Roth IRA be open before earnings can be withdrawn tax-free in a qualified distribution?
10 years
5 years
7 years
3 years
The Roth IRA five-year rule requires the account to exist for at least five tax years before earnings can be withdrawn tax-free in a qualified distribution.
Which of the following describes the triple tax advantage of an HSA?
Contributions grow tax-deferred, earnings taxed, and withdrawals tax-deferred
Contributions are tax-deductible, earnings grow tax-free, and qualified withdrawals are tax-free
Contributions are after-tax, earnings taxed, and withdrawals tax-free
Contributions are tax-deductible, earnings taxed, and withdrawals taxed
HSAs allow tax-deductible contributions, tax-free growth of investments, and tax-free withdrawals for qualified medical expenses, providing three layers of tax advantage.
Which of the following is NOT considered a qualified medical expense for HSA distributions?
Cosmetic surgery
Prescription drugs
Dental treatments
Mental health counseling
Cosmetic surgery generally is not a qualified expense for HSA distributions unless it is necessary to improve a deformity related to a medical condition. The other options qualify.
If you cash out a 401(k) distribution before age 59½, which taxes and penalties typically apply?
10% early withdrawal penalty only
Ordinary income tax plus 10% penalty
Ordinary income tax only
Capital gains tax plus 10% penalty
Early withdrawals from a 401(k) before age 59½ are subject to ordinary income tax plus a 10% early withdrawal penalty unless an IRS exception applies.
Which retirement plan allows after-tax contributions with no immediate tax deduction, but qualified withdrawals are tax-free?
Traditional IRA
Traditional 401(k)
Roth 401(k)
SEP IRA
A Roth 401(k) accepts after-tax contributions and offers tax-free qualified withdrawals. Traditional 401(k)s and IRAs provide current deductions but taxable distributions.
Which retirement account reduces current taxable income but requires distributions to be taxed upon withdrawal?
Traditional 401(k)
Roth IRA
Roth 401(k)
529 College Savings Plan
Contributions to a Traditional 401(k) reduce your current taxable income, and withdrawals in retirement are taxed as ordinary income. Roth accounts operate differently.
What is a 'backdoor Roth IRA' contribution strategy?
Contributing to a non-deductible Traditional IRA then converting to a Roth IRA
Rolling over a 401(k) directly into a Roth 401(k)
Transferring 529 plan funds into a Roth IRA
Directly contributing to a Roth IRA regardless of income limits
A backdoor Roth IRA involves making a non-deductible contribution to a Traditional IRA and then converting that amount to a Roth IRA, allowing high-income taxpayers to bypass direct Roth IRA limits.
In what order does the IRS consider funds withdrawn from a Roth IRA for tax purposes?
Conversions, contributions, earnings
Contributions, conversions, earnings
Earnings, contributions, conversions
Contributions, earnings, conversions
Roth IRA withdrawals follow an ordering rule: first contributions are withdrawn tax-free, then conversion amounts (subject to their own five-year rules), and finally earnings are withdrawn.
What excise tax is imposed on HSA excess contributions that remain uncorrected by the tax-filing deadline?
No penalty if under $500
6% per year until corrected
10% flat penalty
20% excise tax
The IRS imposes a 6% excise tax on excess HSA contributions for each year they remain in the account, encouraging timely correction of overfunding.
After enrolling in Medicare, can you continue to contribute to your Health Savings Account (HSA)?
Yes, if enrolled only in Medicare Part A
No, contributions must stop upon Medicare enrollment
Yes, until age 65
Yes, but only if still employed
Once you enroll in any part of Medicare, you are no longer eligible to make HSA contributions. Continuing would result in excess contributions and penalties.
How many 60-day IRA-to-IRA rollovers are allowed per 12-month period under IRS rules?
Two
Unlimited
Five
One
IRS regulations permit only one 60-day rollover between IRAs per 12-month period for each individual, helping prevent abuse of the tax-deferral rules.
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Learning Outcomes

  1. Identify various types of tax-advantaged accounts and their benefits
  2. Analyze eligibility criteria for contributions and withdrawals
  3. Evaluate tax implications of account distributions
  4. Compare features of IRAs, 401(k)s, HSAs, and more
  5. Apply qualification rules to sample financial scenarios

Cheat Sheet

  1. Tax-Advantaged Account Types - Money jargon alert! Whether you're eyeing Traditional IRAs, Roth IRAs, 401(k)s, or HSAs, each has its own tax perks, contribution limits, and sneaky rules to master. Getting comfy with their unique features now sets you up for savvy retirement planning later. Comparison of 401(k) and IRA accounts
    2. Comparison of 401(k) and IRA accounts
  2. Eligibility Criteria - Not all accounts are open to everyone! Roth IRAs come with income limits, while Traditional IRAs may let you snag a tax deduction based on your earnings and employer plan status. Mastering these rules ensures you don't leave valuable contribution space on the table. Comparison of 401(k) and IRA accounts
    3. Comparison of 401(k) and IRA accounts
  3. Withdrawal Tax Implications - Picture this: Traditional IRA and 401(k) payouts get taxed as ordinary income, but Roth IRA distributions can be tax-free if you play by the rules. Knowing which withdrawals trigger taxes (and when) helps you plot a lean, mean tax strategy. Stay ahead of Uncle Sam's cut! Comparison of 401(k) and IRA accounts
    4. Comparison of 401(k) and IRA accounts
  4. Contribution Limits - In 2025, you can funnel up to $23,500 into your 401(k) if you're under 50, while IRAs cap out at $7,000. Overshooting these caps can mean penalties, so keeping score is key! Use these limits to fuel maximum retirement growth. Comparison of 401(k) and IRA accounts
    5. Comparison of 401(k) and IRA accounts
  5. Employer Matching Contributions - Free money alert! Many employers match a portion of your 401(k) contributions - sometimes dollar for dollar up to a limit. Failing to chip in enough to grab that match is like turning down a bonus, so don't shortchange yourself. Comparison of 401(k) and IRA accounts
    6. Comparison of 401(k) and IRA accounts
  6. Early Withdrawal Penalties - Need cash before 59½? Brace yourself for a typical 10% penalty plus taxes on top - ouch! A few exceptions exist (think first-time home purchases or qualified education costs), so know the fine print before tapping that stash. Comparison of 401(k) and IRA accounts
    7. Comparison of 401(k) and IRA accounts
  7. HSA Triple Tax Benefits - HSAs are the unicorn of savings: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. They double as a mini-retirement account if you keep the funds invested and let them grow. HSAs are a secret weapon for healthcare and future planning! Comparison of 401(k) and IRA accounts
    8. Comparison of 401(k) and IRA accounts
  8. Required Minimum Distributions (RMDs) - Once you hit age 72, Traditional IRAs and 401(k)s demand you withdraw a minimum amount each year - no hiding your funds! Roth IRAs, however, let you sleep easy with no lifetime RMDs. Planning around these rules keeps your tax bill in check. Comparison of 401(k) and IRA accounts
    9. Comparison of 401(k) and IRA accounts
  9. Pre-Tax vs. Post-Tax Contributions - Traditional plans let you lower today's taxable income with pre-tax contributions, while Roth accounts work the reverse - post-tax dollars now for tax-free cash later. Choosing between them is a strategic call based on your current rates and retirement goals. Comparison of 401(k) and IRA accounts
    10. Comparison of 401(k) and IRA accounts
  10. Real-Life Scenario Practice - Ready for some brain gym? Imagine you're a young professional expecting a big income jump - might a Roth IRA now and Traditional later be your power move? Running through these "what-ifs" cements your grasp and sharpens your decision-making skills. Comparison of 401(k) and IRA accounts
    11. Comparison of 401(k) and IRA accounts
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