December 16th, 2019|
The holiday season typically brings cooler temperatures, Christmas carols, and…car commercials. The holidays mean deals on new cars, and most car commercials feature shiny new models with big red gift bows on the roof.
Most of us won’t be gifting the latest model from the dealership to a loved one this holiday season, but there are several reasons why you might want to gift a car to a friend or family member. For example, you may want to gift your old car to a young family member who recently got their license, or to help out a friend in need who may be struggling financially.
Steps to Gifting a Car
The most important step to gifting a car is having a frank discussion with the person who will be receiving the car before you do anything else. You may want the gift to be a surprise, but there is a very important reason why it should not be. Gifting a car is very generous, but the cost to buy a car is not the only expense associated with car ownership.
If the person you are gifting the car to is unable to afford the cost of:
- auto insurance,
- maintenance and repairs,
- annual registration,
- and other fees,
and if you are not prepared or able to also cover these expenses yourself, then gifting a car may not be the right choice at this point in time.
If you are gifting a car you already own:
First, you need to legally own the car. If you are still making payments on the car you want to gift, you will need to finish paying off the lien before you can gift the car, because the financial institution you took out the loan from is technically still the legal owner.
Not sure if you are the legal owner or not? Check the vehicle’s title, which you should have received from the loan company after paying off the lien. If you can’t locate your title document, you can request an additional one from your local DMV after paying a replacement fee.
Next, you will need to transfer the title. The person gifting the car will need to fill out the seller’s portion of the transfer section of the title, and the person receiving the car will need to fill out the buyer’s portion. In California, you will need to:
- Sign the title
- If lienholders are listed on the title, they will need to sign as well
- Fill in the odometer reading (if the car is less than 10 years old)
- Where the title asks for sales price, fill in “gift”
- Provide proof of smog certification (UNLESS you are giving the car to a family member or if the car is less than four years old and not diesel-powered)
- Complete a Statement of Use Tax Exemption form
- Complete a Statement of Facts form (UNLESS you are giving the car to a family member)
- Inform the DMV within 10 days of signing over ownership
- Have the gift recipient take the title to the DMV to register the vehicle in their name and pay the $15 title transfer fee.
If you are buying a new/used car as a gift:
If you are buying a car to gift, you will have four main options.
- Purchase the vehicle outright and follow the steps outlined above.
- Take out a loan in your own name but register the title under both your name and the gift recipient’s.
- Bring the gift recipient with you to the dealership and co-sign a loan.
- Bring the gift recipient with you to the dealership, gift the down payment and have the gift recipient finance the vehicle themselves.
What if the Person I Want to Gift My Car to Doesn’t Have Insurance?
The person receiving the car will not be able to register the car in their name or legally drive the car without insurance. They will need to purchase insurance to receive the gifted car.
What if the Person I Want to Gift My Car to Lives in Another State?
Title-transfer requirements vary state to state. Check the requirements for the state that the gift recipient lives in, because those are the ones you will need to follow.
Does Gifting a Car Affect Taxes?
In most cases, no.
A federal gift tax does exist. This is a tax on a gift-giver, based on the monetary value of the gift. This tax exists to prevent people from avoiding federal estate tax by giving away their money and property before they die. But this also means it only applies to large sums of money.
2019 tax code states that an individual can gift a car (or any other property) up to $15,000 in value, or up to $30,000 in value if jointly gifted with a spouse, without needing to pay gift tax, and without the recipient having to pay income tax on the gift.
Can I Get a Tax Deduction for Gifting My Car?
In most cases, no.
You can get a tax deduction if you gift it to a 501c(3) charity or to a religious organization, but not if you want to gift a car to an individual such as a friend or family member.
If you are gifting your old car to charity, you will also need to itemize your deductions, and you will need to fill out and submit Form 8283 with your tax return if the car is worth $500 or more.
When You Have Questions After a Car Accident, Contact the Team at Berg Injury Lawyers
One reason someone may need a car is because their old car has been wrecked in an accident. And when car accidents also cause injuries, they can leave victims struggling to pay their bills while they recover. If you or a loved one have been injured in a car accident caused by someone else’s negligence, we want to help you get the compensation you deserve. Contact the California car accident attorneys at Berg Injury Lawyers today.