• Gifts valued at a dollar amount of $12,000 or less to any one individual in a single calendar year;
• Gifts to a spouse;
• Payment of tuition or medical expenses on behalf of someone else;
• Charitable contributions; and
• Certain gifts to political organizations.

In addition to the annual exemption for gifts valued at $12,000 or less, an individual may give away a total amount of $1 million during his or her lifetime. In other words, even if you never exceed the annual exemption limit for any given year, if the total value of all gifts you give during your life exceeds $1 million, you will need to pay a gift tax on the amount over that limit.

If a donor's gifts exceed the exemption amount, in most cases the donor must file a gift tax return. For example, if Dan gave Reese gifts totaling $9,000 in 2003, and gifts valued at $17,000 in 2004, a return must be filed by Dan for the gifts given to Reese in 2004, and taxes paid on $6,000 (the $17,000 total less the $11,000 annual gift exemption for those years). Usually, the donor is primarily liable for the payment of any federal gift tax. If the donor does not pay the tax, the recipient of the gift will be personally liable for the payment of the tax. The gift tax return is due on April 15th of the year following the calendar year in which the gift was given, so in the above example Dan would file his gift tax return in 2005. A donor may apply for an automatic four-month extension to file the gift tax return but the date for payment remains April 15.