To gift a car to a family member, you’ll need to transfer the car’s title at your local department of motor vehicles (DMV), listing the sale price as “Gift.” Taxes may or may not be charged on a gift car, depending on the state where the transfer occurs.

Gifting a car to a family member is a great way to reward someone for getting their driver’s license, to help out a loved one in need, or to pawn off your old beater and make way for a new car. No matter what your reasoning for passing on your car, you’ll need to complete a valid

transfer of title

according to your state’s processes to make the gift official.

Taxes, titles, and transfer fees—oh my!

But not to worry; we’re here to remove any confusion and simplify the process. We’ll cover the basic steps and requirements of gifting a car to a family member no matter where you live!

How do you gift a car to a family member?

To give a car to a family member you must complete a transfer of title at your local DMV with the following specifications:

List yourself as the seller.

List the family member who is receiving the gift as the buyer.

List the price as “Gift.”

You’ll also need to list the vehicle’s odometer reading and the vehicle identification number (VIN), then sign and date the certificate of title to make things official. If you give your car to a family member without completing a vehicle title transfer, you will still be considered the legal owner.

Once you’ve completed the title transfer, you’ll just need to make sure that any taxes required by the state are paid and that the recipient has

car insurance

for the vehicle. You may choose to take on these expenses or the recipient can choose to handle them. However, there are a few things you may need to double-check before things get that far.

Make sure the gift car is paid off

You’ll need to

pay off your car loan

before you can give your car as a gift.

Once the car has been paid off, you’ll need to retrieve the title from your bank or lender. If any lienholders are listed on the title, you’ll need to contact them to have them removed or file a discharge of loan at the DMV (if the loan is already paid off).

You may also choose to finance the loan if you are unable to pay it off before you would like to gift the car. You and your recipient could always work out a

car loan transfer

, but this would leave the recipient with a lot more financial responsibility than with a traditional gift.

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Make sure the recipient can legally receive the gift car

Most states require the recipient to be an immediate family member to receive a car as a gift without having to pay any taxes on it. If you’re

gifting a car in Texas

, for example, the recipient must be one of the following to qualify for an affidavit of motor vehicle gift transfer that would exempt them from taxes:

Spouse

Parent/stepparent

Child/stepchild

Sibling

Grandparent

Grandchild

In-law (any relation listed thus far)

Recipient of a deceased person’s estate

Certain revocable living trusts

501(c)(3) non-profit service organization receiving it as a donation

The state may require proof of relation before allowing the gift if you and the recipient have different last names. You may still be able to gift a vehicle to a recipient who is not an immediate family member, but they’d likely have to pay a hefty sales tax. Check your local DMV requirements to see what documents will count.

MORE:

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What to do if you’ve inherited a car as a gift

You may receive a car as a gift from a deceased family member who has left you the vehicle in their will. Depending on your state’s requirements, you will either have to receive an order of transfer from the probate court or file an affidavit with the Registry of Motor Vehicles. A remaining spouse can also perform the transfer if they are listed on the car’s title.

MORE:

How to add a name to a car title

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What you need for the title transfer

Transferring a gift vehicle’s title is the only way to legally transfer ownership of the vehicle to the new owner. Transfer of title requirements vary from state to state, but you can generally expect to bring the following required documents in person to your local DMV:

Completed and signed title

Proof of identity (Like a driver’s license)

Proof of insurance

Depending on your state, you may also be required to have the car’s emission control systems inspected or to submit a smog certification. You may also need to supply an odometer disclosure. (This is especially common for newer cars). Last but not least, you’ll need to pay any local title transfer fees and registration fees (if applicable) to complete the transfer process.

MORE:

What is an odometer disclosure statement?

What to do if you don’t have the title

If you no longer have the title for the car you plan on gifting, you’ll need to

request a replacement title

. Some states allow you to submit a title application in lieu of the title when gifting a car. If approved, the new title will be finalized with you but issued to your recipient. Check your state’s requirements at your local DMV to see

MORE:

Taking a name off a car title: a step-by-step guide

Do you pay gift tax on the car?

Whether or not your gift car will be taxed depends on the state where the gift transfer is happening.

In a standard private car sale, a use tax would be charged based on the purchase price of the vehicle. However, gift cars are typically exempt from any sales tax as long as they’re being gifted to an eligible family member.

Recipients of a

gifted car in California

, for example, can apply for a tax exemption by submitting a form called a statement of facts to the DMV. If you’re

gifting a car in Florida

, the recipient can submit a valid bill of sale or affidavit to qualify for an exemption.

Check your state’s requirements to see if you and your recipient are exempt from taxes on a gifted vehicle. If you do end up having to pay taxes, they will typically be based on the appraised value of your used car—not the original purchase price.

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FAQs

Is it better to gift a car or sell it for $1?

It’s better to gift the car. Some people think that selling a car for $1 is a way to get around any taxes, but gifting a car through your state’s processes is the recommended (and legitimate) way to go.

How do you transfer ownership of a gifted car?

You need to complete a title transfer at your local DMV to officially transfer ownership of a gifted car. List yourself as the seller, the recipient as the buyer, and the purchase price as “Gift.”

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