Exemption

What is an 'Exemption'

An exemption is 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.

BREAKING DOWN '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. Exempt Income

    Certain types or amounts of income not subject to federal income ...
  2. Tax Exempt

    To be free from, or not subject to, taxation by regulators or ...
  3. Personal Exemption

    The dollar amount that each individual taxpayer is able to deduct ...
  4. Waiver Of Exemption

    A provision in a consumer credit contract or loan agreement that ...
  5. SEC Form T-4

    An application for exemption from certain sections of the Trust ...
  6. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that ...
Related Articles
  1. Taxes

    Are You Missing Out On These Tax Exemptions?

    To lower your tax bill, make sure that you're taking all the exemptions that apply to you.
  2. Taxes

    Understanding the Widow’s Exemption

    A widow’s exemption generally refers to the amount a widow can deduct from her taxable income to reduce her tax burden.
  3. Taxes

    8 States With Estate Taxes

    Understand the difference between the federal estate tax and state-specific estate taxes. Learn about some of the worst states with estate taxes.
  4. Taxes

    Is It True That You Can Sell Your Home And Not Pay Capital Gains Tax?

    Based on the Taxpayer Relief Act of 1997, if you are single, the first $250,000 you make on your home sale is not subject to capital gains tax.
  5. Taxes

    2016 Tax Code Changes Add Some Wiggle Room

    It's never too early to prepare for tax season. Next year features a host of tax law changes. Check our handy list to see which ones apply to you.
  6. Retirement

    These 13 States Tax Your Social Security Benefits

    It may surprise many that Social Security benefits are taxed. The best way to not let it derail your tax situation is to plan for it. Here's how.
  7. Taxes

    Next Season, File Taxes On Your Own

    Master these fundamentals and you'll be doing your own taxes with minimal stress.
  8. Taxes

    What's IRS Form 1040 For?

    Most U.S. taxpayers will be familiar with the 1040. By the end of filling it out, you'll know how much tax you owe, or what your refund is.
  9. Your Practice

    Tax Time is Coming; Don't Be Caught Off Guard

    It's time to think about tax returns again. The good news is that the regulations in 2016 have not changed dramatically from last year.
  10. Taxes

    Top Tax Issues For High-Net-Worth Individuals

    Wealth brings benefits, but from a tax perspective it creates special challenges. Here are some tax issues to pay attention to.
RELATED FAQS
  1. Who is exempt from paying Social Security taxes?

    Learn about the groups of people who qualify for exemption from Social Security taxes, and explore the process of applying ... Read Answer >>
  2. Transactions are exempt from registration where …

    Transactions are exempt from registration where … a. A sale, or offer of sale is made to ALL clients of a brokerage ... Read Answer >>
  3. What property / belongings can I keep after filing bankruptcy?

    Discover which types of property you can keep after filing bankruptcy by listing them as exempt from normal liquidation proceedings. Read Answer >>
  4. What deductions, credits and exemptions depend on gross income calculations?

    Understand what deductions, exemptions and tax credits are dependent on the gross income calculation and how these determine ... Read Answer >>
  5. Is there any way to opt out of paying Social Security?

    Understand more about the purpose of the Social Security system and learn which groups of taxpayers are automatically exempt ... Read Answer >>
  6. How can I lower my effective tax rate without lowering my income?

    Discover how to reduce your effective tax rate without losing income by maximizing adjustments and deductions, earning tax-free ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center