Tax Exempt

AAA

DEFINITION of 'Tax Exempt'

To be free from, or not subject to, taxation by regulators or government entities. A tax exempt entity can be excused from a single or multiple taxation laws. Governments are often trying to encourage investment when exempting taxation.

INVESTOPEDIA EXPLAINS 'Tax Exempt'

Certain securities or investor groups can be referred to as tax exempt. For example, the interest earned from municipal bonds is exempt from federal or state taxation. Many pension plans and income trusts are also designed to be tax exempt at the corporate level.

Other forms of tax exempt entities include, but are not limited to, churches, religious organizations, amateur sports leagues and charities that try to provide relief for the poor and underprivileged.

RELATED TERMS
  1. Tax-Exempt Sector

    The market niche comprised of investment vehicles exempt from ...
  2. Tax Efficiency

    An attempt to minimize tax liability when given many different ...
  3. Offshore Mutual Fund

    A mutual fund that is based in an offshore jurisdiction, which ...
  4. Tax-Exempt Interest

    Interest income that is not subject to federal income tax. Tax-exempt ...
  5. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
  6. Yield Equivalence

    The interest rate on a taxable security that would render a return ...
RELATED FAQS
  1. How do I calculate my effective tax rate using Excel?

    Your effective tax rate can be calculated using Microsoft Excel through a few standard functions and an accurate breakdown ... Read Full Answer >>
  2. What is the difference between income tax and capital gains tax?

    The conceptual difference between income tax and capital gains tax is that income tax is the tax paid on income earned from ... Read Full Answer >>
  3. What is the optimal level of withholding tax to enter on my W-4?

    Most workers in the United States have part of their income withheld from each paycheck. This step is required by the federal ... Read Full Answer >>
  4. How can I calculate my withholding tax rate?

    Your withholding tax rate is estimated by your employer, who relies on the information on your Form W-4. How you fill out ... Read Full Answer >>
  5. What's the difference between short-term investments and marketable securities?

    The chief difference between federal and state withholding taxes is that state withholding is done based on state-level tax ... Read Full Answer >>
  6. Which factors drive the marginal propensity to consume?

    A limited liability company (LLC) is not a separate entity from its business owners but is instead considered a pass-through ... Read Full Answer >>
Related Articles
  1. Taxes

    3 Retirement Account Rules To Know

    Stay up-to-date on regulation amendments to avoid penalties as well as take advantage of new opportunities.
  2. Bonds & Fixed Income

    The Basics Of Municipal Bonds

    Investing in these bonds may offer a tax-free income stream but they are not without risks.
  3. Taxes

    Retirement Savings: Tax-Deferred Or Tax-Exempt?

    There advantages and disadvantages to both types of savings accounts. Find out which one is right for you.
  4. Taxes

    Weighing The Tax Benefits Of Municipal Securities

    Find out how to determine whether the tax exemption offered by "munis" benefits you.
  5. Taxes

    "Temporary" Taxes That Stuck

    Taxpayers should be wary when a new "temporary tax" is introduced. Sometimes these temporary taxes are anything but.
  6. Personal Finance

    Get Ready For The Estate Tax Phase-Out

    Changes to federal legislation will affect how your assets are treated once you're gone - be prepared.
  7. Taxes

    Explaining Progressive Tax

    A progressive tax is a levy in a tax system where the tax rate increases as the taxable base increases.
  8. Taxes

    Understanding Income Tax

    Income tax is a levy many governments place on revenue of entities within their jurisdiction.
  9. Economics

    What is a Tax Liability?

    Tax liability is the amount of money a person or entity owes to the government as the result of a taxable event.
  10. Taxes

    Top 4 Ways to Invest Tax Free

    When you're ready to invest, start by looking at these 4 tax-advantaged ways to build your portfolio and your future.

You May Also Like

Hot Definitions
  1. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  4. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  5. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  6. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
Trading Center