What is a tax exemption and how does a taxpayer obtain one?

• A. A deduction on income tax returns automatically granted
• B. A reduction or removal of all or part of property tax liability based on eligibility; obtained by applying with the municipality and meeting statutory criteria
• C. An increase in assessment value
• D. A license to operate a business

Answer: (B)

A tax exemption is a reduction or removal of all or part of property tax liability for which a taxpayer qualifies. In New Jersey, exemptions aren’t automatic; you obtain one by applying with the local municipality—usually through the assessor or tax administrator—and proving you meet the statutory criteria (such as age, disability, veteran status, or other eligibility factors). The municipality reviews the application and, if you’re eligible, grants the exemption, lowering the amount of property tax owed on the property.

This is different from an income tax deduction, which reduces taxable income on your state or federal return, and it’s not an increase in the assessed value or a business license. The key is eligibility and an application process at the local level to reduce the tax owed.