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Investing Basics Beginner: Introduction to Taxes and Investments

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1.
Investments in which earnings build tax-free until you withdraw them are called _______.
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Tax-deferred. "Tax-deferred" means that earnings build tax-free until you withdraw them.
2.
_______ are taxed at a relatively low rate if you hold your investments long enough.
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Capital gains. Long-term capital gains are taxed at a lower rate to encourage investment.
3.
The profits realized on the sale of appreciated stocks you held for more than a year are subject to lowered tax rates.
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True. Profits made on the sale of stocks you held for more than a year are long-term capital gains, which are taxed at lower rates than regular income, including dividends and interest.
4.
A reasonably intelligent person who studies the tax code from time to time can probably make good decisions about how to shelter investment income from taxes.
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False. Even the simplest workplace retirement plan can have tax implications that require expert advice.
5.
Interest paid on dividends, bonds, and bank accounts is generally taxable.
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True. Interest paid on dividends, bonds, and bank accounts is generally taxable as income.