Five main categories of taxpayers are exempt from paying taxes in the U.S.: religious organizations, charities, the military, state and local governments, and specific international organizations.
Religious organizations are exempt from paying taxes on their income if the money is used for religious purposes. It includes churches, mosques, synagogues, and other religious institutions like schools and hospitals.
Charities are also exempt from paying taxes on their income. It includes nonprofits like soup kitchens and homeless shelters and public charities like the Red Cross.
The military is exempt from paying federal income taxes. It includes members of the military and their spouses and dependents.
State and local governments are exempt from paying most types of taxes, including income taxes, sales taxes, and property taxes.
Specific international organizations are exempt from paying taxes, including the United Nations and its affiliated organizations and the World Bank.
Personal Income Tax Guide
- Not-for-Profit Organizations
Not-for-profit organizations like churches, universities, hospitals, the Red Cross, soup kitchens, homeless shelters and others are exempt from paying income taxes under Section 501(c)3 of the Internal Revenue Code.
- U.S. Citizens Working Abroad
Americans who work and live abroad may not pay taxes on income tax up to $112,000. There are requirements for eligibility, including being bona fide residents of a foreign country and present there for at least 330 full days in a year.
- Low-Income Taxpayers
Low-income taxpayers do not need to file their tax returns.
According to the IRS, the following do not need to file their returns:
- Single, under 65 and earning less than $12,550;
- Married, both under 65, filing jointly and earning less than $25,100;
- Married and filing separately, making less than $5;
- Head of household, under 65 and earning less than $18,800;
- Qualifying widow(er) with dependent child, under 65 and earning less than $25,100.
- Taxpayers with Many Deductions
There are many deductions available for qualified taxpayers. These include deductions for unreimbursed expenses on medical bills and other deductions for self-employed and small business owners.
- Taxpayers with Many Dependents
Low-income earners with children may be qualified for Earned Income Tax Credit and Child Tax Credit. There are other deductions included in the American Rescue Plan of 2021. A single person with no children can also claim a tax credit of up to $1502, with an income threshold of $21,430.
Some taxpayers are exempted from taxation, like 501(c)3 organizations. Besides these entities, it is also possible to be exempted from taxation due to large deductions or reduced income. These exemptions are a privilege to specifically qualified individuals and are meant to help their tax burdens.
If you want to know more about taxes and if you qualify for an exemption, be sure to get in touch with us at The Oasis Firm.