It should be stated that exempt income refers to types of income to which federal and state income taxes are not applied. In short words, this means that this type of income is not taxable. Therefore, one may conclude that expenses related to tax-exempt income are disallowed in order to simply prevent a taxpayer from enjoying a double tax benefit and thus becoming enriched at the government’s expense. If taxpayers could deduct a certain expense for tax-exempt income, they would not only deduct the expense linked to that income but also pay no tax on the amount of that income.
Why are expenses related to tax exempt income disallowed?
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Academic.Tips. 2021. "Why are expenses related to tax exempt income disallowed?" August 10, 2021. https://academic.tips/question/why-are-expenses-related-to-tax-exempt-income-disallowed/.
1. Academic.Tips. "Why are expenses related to tax exempt income disallowed?" August 10, 2021. https://academic.tips/question/why-are-expenses-related-to-tax-exempt-income-disallowed/.
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