Taxes and Insurance Flashcards
6 cards from real FICEP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Taxes and Insurance flashcards as text
What is the difference between a tax deduction and a tax credit?
Answer: A deduction reduces taxable income; a credit directly reduces the amount of tax owed
Tax deductions reduce income subject to tax, while credits directly reduce the tax bill dollar-for-dollar.
A client earns $40,000 and does not itemize. What common tax credit might they be eligible for?
Answer: Earned Income Tax Credit
The EITC is available to lower and moderate-income workers regardless of itemizing, and it is refundable.
What is the purpose of Form W-4 and when should it be updated?
Answer: It tells the employer how much tax to withhold, and should be updated after major life changes
Form W-4 guides employer tax withholding and should be updated after marriage, divorce, birth of child, or significant income changes.
Which type of insurance is most critical for a single-income family with young children?
Answer: Life insurance on the primary earner
Life insurance on the primary earner is critical for protecting family financial security.
What is the standard deduction for 2024 and when should a taxpayer itemize?
Answer: $14,600 for single filers; itemize when deductible expenses exceed this amount
The 2024 standard deduction is $14,600 for single filers. Itemize only when total deductible expenses exceed the standard deduction.
What is a health savings account and what triple tax advantage does it offer?
Answer: An account with tax-deductible contributions, tax-free growth, and tax-free withdrawals for medical expenses
HSAs offer a unique triple tax advantage: deductible contributions, tax-free growth, and tax-free medical withdrawals.