Exemption

Exemption

Direct reductions from gross income allowed by the IRS.

Tax Exempt

Describing income or organization that is not subject to taxation. Examples of tax exempt organizations include religious groups and charities. Additionally, certain income an individual or corporation derives may be tax exempt. For example, coupons from a municipal bond are tax exempt at the federal level. See also: Tax credit, tax deduction.

exemption

An annual deduction permitted a taxpayer and each dependent for use in computing taxable income. An extra exemption is allowed for being blind or for being 65 years of age or older. The size of the annual exemption is altered each year according to the level of inflation. Also called personal exemption.

Exemption.

An exemption is a fixed dollar amount that you can subtract from your adjusted gross income to reduce your taxable income. The per-person exemption amount is set by Congress each year, and typically increases from year to year.

If you're over 65 or blind, you qualify for an additional exemption. Taxpayers whose adjusted gross income is higher than the government limit may not qualify for an exemption.

Exemption

A deduction for taxpayer, spouse, and each dependent that is subtracted from income that would otherwise be taxed. The allowable amount must be reduced if adjusted gross income exceeds a specified amount. See our Exemption Allowance rate table for the current amount.