Exempt means your are free from deducting federal income tax from paychecks.
Explanation:
Exempt means that someone has a special permission not to do something.
Tax-related, exempt means not having to pay taxes at the federal, state or local level. That is, a person that would normally have to pay taxes from their paychecks has been granted a permision not to submit them. Certain groups of people such as veterans and clergymen are generally granted full or partial tax exemptions. Charitable, fraternal as well as religious organizations are commonly free from paying taxes.
