What is the definition of taxable gifts?

The definition of taxable gifts refers specifically to the gifts that exceed the annual exclusion limit set by the IRS. Each year, individuals can make gifts up to a certain amount without incurring gift tax; this amount is known as the annual exclusion. For any gift that surpasses this threshold, the giver is required to report it for tax purposes, even if they do not owe any tax due to the lifetime gift tax exemption.

This distinction is essential for understanding how the gift tax system operates. While many individuals may give gifts, only those that exceed the annual allowance must be reported and could be subject to taxes. Consequently, options that suggest all gifts, deductions, or those made to nonprofit organizations would fall into the category of taxable gifts do not align with the specific IRS guidelines regarding taxable gifts and their exclusions.