Tax exemptions are defined as what?

• A. The assumed taxable value
• B. An amount allowed by law that reduces the amount that would otherwise be taxed
• C. The market value
• D. The assessed value

Answer: (B)

Tax exemptions are an amount allowed by law that reduces the amount that would otherwise be taxed. In property taxes, exemptions lower the tax base, not the market or assessed value itself. For example, if the market value is 300,000 and the assessed value used for tax purposes is 260,000, an exemption of 40,000 would make the taxable value 220,000. The tax owed is based on that 220,000, not the full 260,000. Exemptions simply reduce the portion of value subject to tax.