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Step 1
Define what type of tax free gift you will be giving. Tax free gifts (as of 2008) allow for gifts of $12,000 to individuals and to as many individuals as desired in one year's time, spouses can give a total of $24,000 to one individual with gift splitting (meaning each spouse is giving $12,000 for a total of $24,000 to one individual), gifts of tuition, gifts for the use of a political organization, gifts in the form of medical expenses, gifts to charitable organizations, or real estate gifts that are considered a qualified conservation contribution, which has a perpetual restriction on the use of the real estate.
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Step 2
File gift tax return Form 709. Tax return Form 709 can be found on the IRS web page (see Resources) and included with your yearly tax return. Form 709 is necessary if the gift was more than $12,000 to one person, which allows for the gift in excess of $12,000 to be taxed, if gift splitting with spouse, a gift was given to someone other than a spouse that will have monetary value in the future, or a gift of interest in property that will end in the future was given to a spouse.
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Step 3
You do not need to file a gift tax return if the lump sum donation was for the use of a political organization, tuition payments, medical payments, given to a charitable organization, or real property gift that has a qualified conservation contribution.
