taxexempt

Tax-exempt describes a status in which certain entities, activities, or types of income are not subject to specific taxes under law. Commonly this applies to nonprofit organizations that operate for charitable, religious, educational, scientific, or other public-benefit purposes. To qualify, an entity typically must operate in accordance with the exempt purpose, avoid private benefit or excessive earnings, and follow reporting and governance requirements.

In the United States, tax-exempt status is granted by the tax authority to eligible nonprofit organizations under the Internal Revenue Code. The best-known category is 501(c)(3), which covers charities, churches, and many educational or scientific organizations. Other 501(c) groups cover social clubs, veterans’ organizations, and trade associations, each with its own rules. Tax-exempt organizations often receive federal income tax relief and may offer donors the ability to claim tax deductions for contributions. They may also be exempt from certain other taxes and may qualify for property or sales tax exemptions in some jurisdictions. Compliance typically includes annual filings and adherence to limits on political activity and lobbying, with the possibility of revocation of exempt status for violations.

Outside the United States, many countries recognize similar exemptions for charities and nonprofit bodies, with varying criteria and procedures. Some jurisdictions also provide tax relief on specific types of income for individuals, such as interest or municipal bonds, or exemptions on purchases for eligible organizations. Overall, tax-exempt status aims to support activities considered beneficial to the public while balancing revenue needs and regulatory oversight.