what is tax exempt

Tax exemption refers to the reduction or removal of a liability to make a compulsory payment that would otherwise be imposed by a ruling power upon persons, property, income, or transactions. It may provide complete relief from taxes, reduced rates, or tax on only a portion of items. Tax-exempt status can apply to individuals, businesses, or organizations, and it allows them to be free from tax obligations at the federal, state, or local level. This status is often granted to entities that are organized and operated exclusively for religious, charitable, scientific, literary, educational, or other public purposes.