Exemption

Definition of 'Exemption'


A deduction allowed by law to reduce the amount of income that would otherwise be taxed. An exemption is based on a status or circumstance rather than economic standing.

Investopedia explains 'Exemption'


There are two types of exemptions: personal and dependency.

An example of an exemption is the reduction in taxes you are granted for the dependent children (under the age of 18) living with you.



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