To be tax exempt means that some or all income is free from tax at the local, state, and/or federal level. The tax exemption status may apply to certain streams of income or revenue, or to certain individuals or businesses.

For example, nonprofit organizations may be exempt from paying federal income taxes. Some individuals may qualify for exemptions on specific types of income, like certain Social Security benefits or interest from municipal bonds. Tax-exempt status can also apply to specific purchases, like sales tax exemptions for qualifying charities or religious institutions.

Understanding what qualifies as a tax exemption, and what doesn't, is key to staying compliant and maximizing your tax benefits. Need help? Have questions or concerns? Schedule a time to talk taxes with the pros today.

Sharon Brucker, CPA Senior Tax Research Analyst Published on: September 15, 2025
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*This content is for general informational purposes only. It is not intended to be comprehensive and should not be construed as professional tax or financial advice for any specific individual tax situation. Taxpayers should always consult a qualified professional for individual guidance. This information constitutes a solicitation under the Treasury Department's Circular 230. Most offices are independently owned and operated.