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Tax season 2024: who can apply for federal tax exemption and why?

The aim of tax-exempt status is to support organisations that engage in activities that benefit the public or fulfill certain social or charitable purposes.

Avoid these eight tax deductible mistakes

Tax season 2024 is set to begin on Monday, 29 January when the IRS will begin accepting and processing returns for tax year 2023.

If you are now turning your attention to your filing, you will likely be wondering how to minimise the amount of tax that you are required to pay. Some, however, may not be required to pay tax at all. Certain organisations are eligible for federal tax exemptions:

  • Charitable, Religious and Educational Organizations
  • Social Welfare Organizations
  • Other Nonprofit or Tax-Exempt Organizations

If you think that your organisation may qualify for a federal tax exemption you need to check that it meets all the requirements outline in the Internal Revenue Code.

The application process for recognition of exemption varies between different types of organizations; you can find all the assistance you need on the IRS’ Tax Exemption FAQ page.

Standard Deduction increase could make you exempt

The federal tax exemption relates to certain types of organizations that are not required to pay tax, or can get their tax bill reduced.

For individual filers, you may be able to eliminate your tax burden with the standard deduction. Each year the IRS designates a certain amount of income per person that is not subject to taxation, which can be deducted from total income to reduce tax liability.

This ‘standard deduction’ changes every year and is also based on your personal situation, with different thresholds for single, head of household, and joint filers.

Here are the standard deduction thresholds for the 2023 tax year:

Filing status20242023
Single filers & Married couples filing separately$14,600$13,850
Married couples filing jointly & surviving spouses$29,200$27,700
Head of Household$21,900$20,800

You can wipe off these amounts from your total taxable income, reducing your tax burden. If your income for the tax year falls below these thresholds then you will not be required to pay tax to the IRS.

But bear in mind that you will still be required to submit a tax return with the IRS, simply to provide proof that you are not liable to pay income tax for the year in question.