A tax exemption is an amount of money that can be deducted
from one's gross income when figuring out the amount of money on which tax will have to
be paid.
Your gross income is the total amount of money
that you make. But you do not typically have to pay taxes on all of that money.
Instead, there are certain exemptions that you can take to reduce the amount of income
that you officially have. For example, there are tax exemptions for each person who is
a member of your household. You get to take the amount of the exemption, multiply that
by the number of people in your household, and then deduct that product from the amount
of income that you have to claim.
By taking exemptions like
this (or like those for charitable giving), you can decrease your taxable income and
thereby have to pay taxes on a lower amount of income.
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