- What Is An Offer in Compromise and What Does It Mean?
- What Does Non Collectible Status Mean?
- What Is a Federal Tax Lien?
- What Is a Dependent Exemption?
- Benefits Received Principle Definition
- Ability to Pay Definition
- What Does Adjusted Gross Income Mean?
- Income Tax Return Amount Due Meaning
- Bonus Definition
- Business Taxes
- What Is a Commission?
- Direct Deposit Definition
- What Is Direct Tax?
- Earned Income Definition
- What Is the Earned Income Tax Credit?
- Electronic Return Originator Meaning
- What Is a Flat Tax?
- What Is an Injured Spouse Claim?
- What Does IRS Innocent Spouse Relief Mean?
- What Is Property Tax?
- Tax Deficit Meaning
- Electronic Filing
- Employee Taxes
- Excise Tax
- Tax Exempt
- Compulsory Filing of Income Tax Return
- Gross Income Meaning
- What Are Exemptions on Tax Returns
- Test to Become a US Citizen
- What Is Head of Household
- What Is Federal Income Tax?
- What Is an Authorized E-File Provider?
- Who Needs to File a Tax Return?
- Learn All About Financial Records
Tax Exempt: What It Is and What It Means
What does it mean to be tax exempt? The government does not require tax on certain transactions and income types if they are tax exempt.
As an individual or business, you may report tax-exempt items on your tax return but only as a record, since you don’t have to pay taxes on them. In contrast to tax deductions, which reduce gross taxable income, tax-exempt items are left out of all tax calculations.
There’s another use of the term: An entire organization may also be tax-exempt, which means that a specified amount of the gifts and income they receive cannot be taxed.
How to Get a Tax Exemption
If you are not a dependent on someone else’s tax return, you can be granted a personal tax exemption on your own return. This is a set amount that lowers your taxable income.
Even though this sounds similar to a tax deduction, it is distinct and less restricted. You may also get an exemption based on each of your dependents.
Tax-exempt organizations fall under 501(c)(3) of the IRS tax code. Such an organization is exempted from paying income tax on donations or earnings. Taxpayers who donate to tax-exempt organizations may also lower their taxable income through their donation.
Tax-exempt businesses may be involved in:
- Charity
- Religion
- Education
- Charitable publishing
- Science
- Public safety testing
- Amateur sports
Local or state laws may also grant tax exemptions to businesses that move into their region in the form of property or sales tax exemptions.
Tax Help MD Can Help You Prepare and File Your Taxes Correctly
Local, state, and federal tax laws are complex. There are many correct and incorrect ways to claim deductions and tax exemptions.
If you file your taxes with professional assistance, you can ensure you get the most benefit out of these laws. Contact us today to schedule a free 15-minute appointment. Trust The Tax Doctor to file your taxes right or to help you resolve a tax debt.
Showing our 5 star reviews