A tax exemption is an exemption from all or certain taxes of a state or nation in which part of the taxes that would normally be collected from an individual or an organization are instead foregone.

Normally a tax exemption is provided to an individual or organization which falls within a class which the government wishes to promote economically, such as charitable organizations. Tax exemptions are usually meant to either reduce the tax burden on a particular segment of society in the interests of fairness or to promote some type of economic activity through reducing the tax burden on those organizations or individuals who are involved in that activity.

Typical tax exemption criteria used include: age of the individual paying tax, public services which the individual has performed (e.g., war veterans), ownership of types of property (homeowners, farmers), geographic location of property, income level of the individual paying the tax, or the value of the property being taxed.

In the United States the classic property tax exemption provided homeowners is the homestead exemption. There are many others such as exemptions on income tax (exemptions for dependents or people such as children who are financially dependent on the tax payer).

Tax exemptions have a history as being tools of social and economic change with unintended consequences.
Source

The limit on the exclusion for payments made on a per diem or other periodic basis under a long-term care insurance contract increased last year to $260 per day. The limit applies to the total of these payments and any accelerated death benefits made on a per diem or other periodic basis under a life insurance contract because the insured is chronically ill.

Under this limit, the excludable amount for any period is figured by subtracting any reimbursement received (through insurance or otherwise) for the cost of qualified long-term care services during the period from the larger of the following amounts.

• The cost of qualified long-term care services during the period.
• The dollar amount for the period ($260 per day for any period in 2007).