The Complete Guide To Gifting Vehicles
Perhaps you have a student who is about to graduate or someone in dire need of a car. You might know someone who is financially struggling and would love to gift them a vehicle. No matter what reason, you may find yourself in a situation where you want to gift a vehicle to someone else. It is important to understand how gifting a vehicle works, as well as the tax implications.
Make sure the car is paid for
If you don't own the vehicle, you won't be able to gift or transfer it. If you still owe a car loan balance, you will need to pay it off before you can gift the car. To confirm the final payment, make sure to get a copy from your bank or dealer's financing department.
Take into account the financial situation of the recipient
You can gift a car to someone for no financial gain but you should still discuss the terms with the recipient. You should make sure that they know that they are responsible for all costs associated with the car once they give it to them. This includes gas, insurance, maintenance, and other expenses. It is also important to determine who will pay the taxes and fees associated with the transfer of the title. You might reconsider your decision if the recipient cannot afford to pay the costs associated with the ownership of the car.
You should be prepared to pay the gift tax
Although there is no sales tax on your gift of a vehicle, there could be a federal gift or gift tax. Each year the requirements change, but generally a gift tax will be applied if the vehicle's fair market value exceeds $15,000 for one person or $30,000 for a couple. The gift tax is usually between 18-40%.
Make a bill of sale
You may still be liable if there isn't a bill of sale. To avoid any confusion, you can create a bill for sale with the following information:
- Make and model
- Price of the vehicle
- Reading the odometer
- Your signature and that of the giftee
Transfer the vehicle title
To officially transfer ownership of your vehicle, you must transfer the title. To transfer your vehicle title, you can visit your local DMV and fill out all necessary paperwork. You will also need to pay a transfer fee. You will then list the vehicle's price as a gift. Before you gift your vehicle, be aware that vehicle transfer laws and fees can vary from one state to the next.
Check that the new owner is insured to drive the car
Once you have given the keys, make sure that the giftee has proper insurance to drive the car. Without insurance, they will not be allowed to legally drive the car. They will need to contact their insurance company to add the vehicle to their existing car insurance if they already have it. They will need to purchase insurance if they don't have it.