exemption

Tax exemption is 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. Tax-exempt status may provide complete relief from taxes, reduced rates, or tax on only a portion of items. Examples include exemption of charitable organizations from property taxes and income taxes, veterans, and certain cross-border or multi-jurisdictional scenarios.
A tax exemption is distinct and different from a tax exclusion and a tax deduction, all of which are different types of tax expenditures. A tax exemption is an income stream on which no tax is levied, such as interest income from state and local bonds, which is often exempt from federal income tax. Additionally, certain qualifying non-profit organizations are exempt from federal income tax. A tax exclusion refers to a dollar amount (or proportion of taxable income) that can be legally excluded from the taxable base income prior to assessment of tax, such as the $250,000/$500,000 home sale tax exclusion in the U.S. A tax deduction is a documented amount subtracted from the adjusted gross income to compute taxable income, such as charitable contributions.
International duty free shopping may be termed "tax-free shopping". In tax-free shopping, the goods are permanently taken outside the jurisdiction, thus paying taxes is not necessary. Tax-free shopping is also found in ships, airplanes and other vessels traveling between countries (or tax areas). Tax-free shopping is usually available in dedicated duty-free shops. In such a scenario, a sum equivalent to the tax is paid, but reimbursed on exit. More common in Europe, tax-free is less frequent in the United States, with the exception of Louisiana. However, current European Union rules prohibit most intra-EU tax-free trade, with the exception of certain special territories outside the tax area.

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