exemption
eg-ZEMP-shun
/ɪɡˈzɛmpʃən/
The process of freeing or state of being free from an obligation or liability imposed on others.
An exemption completely removes a portion of income or a specific entity from tax liability, whereas a deduction only reduces taxable income based on expenses.
The story behind the word. From Latin 'eximere', meaning 'to take out' or 'buy out' (from 'ex-' 'out' + 'emere' 'to buy/take'). In ancient Rome, it referred to being bought out of slavery or military service.
Word relationships
- immunity: Immunity is legal protection from prosecution or liability, while exemption is a release from a specific financial or civic duty.
- exclusion: Exclusion means leaving something out entirely, whereas exemption is the formal release from an obligation.
- liability: Liability is being legally bound to an obligation, whereas exemption is being freed from it.
Commonly confused with
- deduction: An exemption is a complete release from a tax obligation on a specific amount, while a deduction is a reduction based on spent expenses.
Word family
- exempt (verb): To free from an obligation.
- exempt (adjective): Free from an obligation.
Collocations
- tax exemption
- personal exemption
- claim an exemption
- religious exemption
Example sentences
- "He claimed a personal exemption on his tax return." Tax Return Instructions
Memory hook
Exemption lets you 'exit' the obligation. Exit the tax obligation.
When not to use
Do not use when you mean a simple discount; an exemption is a total release from a rule or duty.
Fun facts
- In some countries, religious organizations and charities enjoy automatic tax exemptions, a practice dating back to ancient Egypt where priests were exempt from agricultural taxes.
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