The Serie A club had hoped to re-sign the Brazil international, who joined Real in June 2009, before last year's September transfer deadline but negotiations fell through.
But when the 30-year-old was pictured at a Milan restaurant with his international team-mate and current Rossoneri striker Robinho this week, reports in Italy suggested the move was back on, with Galliani today confirming negotiations are indeed underway.
He told the Gazzetta dello Sport: " Kaka? (President Silvio) Berlusconi has spoken to him today. All three of us need to agree.
"We are struggling to make ends meet in terms of the numbers, but we can succeed if we are a bit clever, imaginative and make some sacrifices."
Kaka completed a 68.5million euro (£57million) transfer to Real Madrid in 2009 after spending six successful seasons with Milan, winning the league title, Champions League and Club World Cup to become a firm fan favourite at the San Siro.
A disparity in tax arrangements between Spain and Italy was the reported cause of the breakdown in talks last summer, with Galliani admitting money is a stumbling block once again.
"We are working on the financial agreement but we've hit a wall with his wages," he added. "Our love for Kaka has never ended but unfortunately the financial regulations meant we had to sell him."
He added: "Are we talking to anybody else? No, Kaka is the only player we are talking with."