Exemption

AAA

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.

RELATED TERMS
  1. Generation-Skipping Transfer Tax ...

    A tax incurred when there is a transfer of property by gift or ...
  2. IRS Publication 929: Tax Rules ...

    A document published by the Internal Revenue Service (IRS) that ...
  3. IRS Publication 501

    A document published by the Internal Revenue Service that covers ...
  4. Personal Exemption

    The dollar amount that each individual taxpayer is able to deduct ...
  5. Adoption Credit

    A federal tax credit that may be claimed by federal taxpayers ...
  6. Exempt Income

    Certain types or amounts of income not subject to federal income ...
Related Articles
  1. Next Season, File Taxes On Your Own
    Taxes

    Next Season, File Taxes On Your Own

  2. Deducting Losses On Your IRA Investments
    Taxes

    Deducting Losses On Your IRA Investments

  3. Is it true that you can sell your home ...
    Investing

    Is it true that you can sell your home ...

  4. After-Tax Balance Rules For Retirement ...
    Taxes

    After-Tax Balance Rules For Retirement ...

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center