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.

BREAKING DOWN '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 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. Insurance

    Understanding Taxes on Life Insurance Premiums

    Learn about the tax implications of life insurance premiums, including when they might be taxable and whether they are tax deductible.
  8. Taxes

    What IRS Form 1023 Is Used For

    To be treated as a tax-exempt organization, start by filling out this form.
  9. Taxes

    Late with Your Taxes? Grab IRS Form 4868

    Fill out this form to get a few more months to file your tax return. But remember, April 15 is still the payment due date if you owe taxes.
  10. Economics

    The Problem With Today’s Headline Economic Data

    Headwinds have kept the U.S. growth more moderate than in the past–including leverage levels and an aging population—and the latest GDP revisions prove it.
RELATED FAQS
  1. Are spousal Social Security benefits taxable?

    Your spousal Social Security benefits may be taxable, depending on your total household income for the year. About one-third ... Read Full Answer >>
  2. How do you calculate penalties on an IRA or Roth IRA early withdrawal?

    With a few exceptions, early withdrawals from traditional or Roth IRAs generally incur a tax penalty equal to 10% of the ... Read Full Answer >>
  3. Are credit card rewards taxable?

    Credit card rewards are taxable in the United States some of the time. The Internal Revenue Service (IRS) classifies credit ... Read Full Answer >>
  4. Are Social Security benefits taxable after age 62?

    Eligibility to collect Social Security benefits begins at age 62. Many seniors, to collect larger benefit amounts, wait until ... Read Full Answer >>
  5. What are the best free online calculators for calculating my taxable income?

    Free online calculators for determining your taxable income are located at Bankrate.com, TaxACT.com and Moneychimp.com. Determining ... Read Full Answer >>
  6. In what instances does overhead qualify for certain tax allowances?

    Businesses are just as keen as anyone else to keep their tax burdens low by any means possible. Overhead expenses often qualify ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  2. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  3. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  4. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  5. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  6. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!