While filing taxes, one can reduce taxes by claiming certain deductions or claiming exemptions. Taxes are exempted in many forms and they either reduce or entirely eliminate your obligation to pay tax.
Tax exemption reduces the income that is subject to tax by the exemption amount. Most taxpayers are entitled to an exemption or deduction while calculating their taxes.
Tax exemptions help taxpayers and organizations reduce their taxes. Accordingly, investments with tax exemptions can be very attractive, particularly to investors in high tax brackets or in economic environments in which taxes are high or expected to rise.