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Who Is Exempt from Paying Taxes?

Who Is Exempt from Paying Taxes?

Milford, NH Resident Asks an Important Question

There are some groups that are exempt from paying taxes. These include qualified 501(c)3 non-profit organizations, US citizens working abroad, and some low-income individuals. While most of us will have to pay some amount in taxes throughout the year, there are some circumstances when no taxes will be owed. For those with low or no income, lots of deductions, or many dependents taking advantage of the Earned Income Tax, you may wind up with no tax bill for the year.

A Milford resident was discussing the necessity of taxes over a family dinner. It was brought to his attention that some groups are not required to pay taxes. Stunned, he contacted Merrimack Tax Associates to better understand these scenarios.

Groups Excluded from Paying Taxes

Charitable organizations, including churches, universities, hospitals, and other non-profit groups, may be exempt from paying taxes. To be classified as exempt, they must be a section 501(c)3 organization as outlined in the Internal Revenue Code. Americans working overseas may not be required to pay taxes on the money earned. This is true for up to $120,000 in 2023, and $126,500 in 2024.

Deductions, Dependents, and Low-Income Can Leave You with a $0 Tax Bill

Low-income individuals whose income does not exceed the standard deduction do not need to pay taxes or file a return. In 2023, this amount was $13,850 for individuals and $27,700 for those married couples filing jointly. Some taxpayers may have a substantial number of deductions on their taxes, dropping their income below the taxable threshold. This may happen if there were large medical expenses throughout the year, deducted on a Schedule A.

Lower-income families that have many dependents may have their income drop below the taxable amount. When taking advantage of the Earned Income Tax Credit, married couples with three or more children can qualify for a credit of $7,430 in 2023. In 2024 that amount will go up to $7,830.

While most of us will wind up paying taxes each year, it is possible for others to be completely exempt as the Milford resident learned.

Tax credits, tax deductions, tax exemptions, taxes