Definition of 'Exemption'
There are a number of different types of exemptions, including:
* Personal exemptions: These are exemptions that are available to all taxpayers, regardless of their income. The amount of the personal exemption is based on the taxpayer's filing status.
* Dependent exemptions: These are exemptions that are available for taxpayers who support dependents. The amount of the dependent exemption is based on the age and relationship of the dependent.
* Itemized deductions: These are deductions that taxpayers can claim for certain types of expenses, such as medical expenses, mortgage interest, and charitable contributions.
Taxpayers can claim exemptions on their federal income tax returns. The amount of exemptions that a taxpayer can claim will reduce their taxable income, and therefore their taxes.
It is important to note that exemptions are not the same as deductions. Deductions reduce the amount of income that is subject to tax, while exemptions reduce the amount of tax that is owed.
Exemptions can be a valuable tool for taxpayers to reduce their tax liability. However, it is important to understand the different types of exemptions and how they work in order to maximize their benefits.
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