Definition

1. Adjective:

   • Not subject to taxation: Describes goods, funds, income, or securities that are legally free from being taxed by a government authority.

2. Noun:

   • A security that is not subject to taxation: Refers to a specific financial instrument, such as a bond, whose interest payments are not taxed.

Usage Examples

• Adjective:

  • The charity received a *tax-exempt status from the government.*
  • Many municipalities issue *tax-exempt bonds to fund public projects.*
  • Interest earned on these accounts is *tax-exempt.*

• Noun:

  • Investors seeking steady income often include *tax-exempts in their portfolios.*
  • The yield on that *tax-exempt is very attractive for high-income earners.*

Advanced Usage

• "tax-exempt income": Income, such as interest from municipal bonds, that is not included in gross income for tax purposes.
  • Her tax-exempt income includes interest from state bonds.
• "tax-exempt organization": An organization, like a charity or religious institution, that is recognized as not being liable to pay taxes.
  • Donations to a tax-exempt organization are often deductible.

Variants and Related Words

• Tax-exemption (n): The state of being exempt from tax.
  • The foundation applied for tax-exemption.
• Tax-free (adj): Similar in meaning to tax-exempt, often used interchangeably in casual contexts, though sometimes with specific legal distinctions.
  • She bought tax-free goods at the airport duty-free shop.

Synonyms

• Untaxed (adj): Not taxed.
• Nontaxable (adj): Not subject to tax.

Related Phrases

• Tax-advantaged: Describing an investment or account that has favorable tax treatment, which may include being tax-exempt, tax-deferred, or offering deductions.
  • A 401(k) is a tax-advantaged retirement account.
• Tax-deferred (adj): Describing an investment where taxes are postponed until a later date, typically upon withdrawal. This is different from tax-exempt, where taxes are never applied.
  • Growth in this annuity is tax-deferred.

Adjective

1. (of goods or funds) not taxed
   • tax-exempt bonds
   • an untaxed expense account

Noun

1. a security that is not subject to taxation