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exemptions for orgs

 

 

Tax exemptions actually come in many forms, but one the thing they all have in common is they either reduce or entirely eliminate your obligation to pay tax. Most taxpayers are actually entitled to an exemption on their tax return that reduces your tax bill in the same way a deduction does. Federal and state governments frequently exempt organizations from income tax entirely when it serves the public, such as with charities and religious organizations.

 

Personal exemptions

If you are one who is not claimed as a dependent on another taxpayer’s return, then you can claim one personal tax exemption. This is a fixed amount that would generally increases each year. The exemption reduces your taxable income just like a deduction does, but has fewer restrictions to claiming it. If you are married and file a joint tax return, both you and your spouse each get an exemption.

Dependent exemptions

The IRS also allows you to take additional exemptions for each dependent you claim. Frequently, the source of these exemptions are the children who would be the ones who have lived with you for more than half the year, are under 19 years old, or under 24 if a full-time student and who don’t provide more than half of their own financial support during the tax year. Some of your relatives can also qualify to be your dependents if they live with you and even your parents who don’t.

Tax-exempt organizations

For an organization to receive tax-exempt status, it must satisfy all IRS requirements. Generally, these are organizations that would not operate for profit and provide valuable services to the community such as a charity. If an organization receives tax-exempt status it’s not required to pay federal income tax, but must maintain accurate records to keep its status. Donations you make to these organizations usually entitle you to claim a charitable contribution deduction if you itemize.

 

 

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