Why tax exemptions

For example, a business may be exempt from paying local property taxes if it moves its operations to a particular geographic area. In Massachusetts, the state provides many telecommunication companies that provide cable television, Internet access and public broadcasts of radio and television an exemption from sales tax. Many cities and states also offer sales tax holidays where consumers can purchase goods without paying state or local sales taxes.

Remember, with TurboTax , we'll ask you simple questions about your life and help you fill out all the right tax forms. Whether you have a simple or complex tax situation, we've got you covered.

Feel confident doing your own taxes. Just answer simple questions about your life, and TurboTax Free Edition will take care of the rest. For Simple Tax Returns Only. Tax Exemptions and Deductions for Families. Video: What Are Tax Exemptions?

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Learn more on the department's website. Personal exemptions no longer exist. You'll need to have an IRA account first. Here's how to open one quickly. Tax exemptions whittle down what counts as income in the first place; that is, exemptions usually come right off the top.

Tax credits are dollar-for-dollar reductions in your tax bill. There used to be two kinds of income tax exemptions — personal exemptions for you and your spouse, and dependency exemptions typically for your children or other people you support — but these went away with the new tax rules that took effect in What does it mean to be tax exempt? Who is tax exempt? Are you exempt from withholding tax?

Did you receive income that isn't taxable? Are you exempt from minimum wage and overtime rules? What is a tax exemption? Send your tax refund straight to an IRA account. A tax exemption excludes certain income, revenue, or even taxpayers from tax altogether. For example, nonprofits that fulfill certain requirements are granted tax-exempt status by the IRS, preventing them from having to pay income tax.

The tax code distinguishes between entities that receive revenue through voluntary donations used for charitable expenses and those that earn revenue through market activity.

As a category, tax-exempt entities exist because they do not make a profit and therefore have no taxable income. By contrast, corporations and pass-through businesses earn net profit that is taxed.

For example, imagine two business: Nonprofit A and Corporation C. Nonprofit A receives voluntary contributions as its only source of income, which is then used to pay expenses such as salaries and program-related activities.

Corporation C receives revenue from market activity, which is then used to pay workers, reinvest, and earn more income. The IRS grants tax-exempt status to organizations that meet the requirements under Section c of the tax code. None of its revenue may be used to benefit any private shareholder or individual.