Why are churches tax-exempt?
Although not mandated by the Constitution, churches are tax-exempt because the U.S. Supreme Court believes that taxing them would destroy the free exercise of religion and lessen the separation of church and state [source: Stanley].
Who is exempt from paying income taxes?
Certain groups of people who meet specific criteria don't have to pay income taxes. For example, if you're single, under the age of 65, and your yearly income is less than $9,350, or married, under 65, with income less than $18,700, you're exempt from paying taxes. If you're over the age of 65, single and have a gross income of $10,750 or less, you don't have to pay taxes. Or if you're married and over 65, you can earn up to $20,900 before paying taxes [source: IRS].
A widow or widower over the age of 65 with a dependent child making less than $16,150 doesn't have to pay either. On the other end of the spectrum, if you're 19 or younger or a full-time student under 24, you are considered a dependent and you don't have to pay taxes. The IRS also exempts self-employed people who earn less than $400 [source: IRS].
Dependents and some disabled are also exempt. These include the legally blind, those depending on another for income, individuals dependant on welfare and Social Security, people with permanent disabilities and war veterans on disability.
The tax code is not only used as the basis for collecting revenue, but also to encourage and reward certain activities. Taxpayers who would normally pay taxes can limit or eliminate their liability by taking advantage of available tax credits, such child-care credits, saver's credit and education credits such as the American Opportunity and Lifetime Learning credits, which can be claimed for tuition, course materials and certain fees.