Gifting a Car in Indiana
As long as you’ve got the vehicle title, you can gift a car in Indiana by filling out the seller’s portion of the transfer section of the title.
Written by Ethan Moser
Edited by Jessica Barrett
You’re much better off gifting a car rather than selling it for $1 in
Indiana
. This is the more legitimate thing to do and the only way to avoid your giftee needing to pay sales tax on the vehicle’s fair market value.- Gifting vehicles are exempt from sales tax in Indiana, but the gift-giver may need to pay a gift tax if the car’s value is greater than $17,000.
- If you’re gifting a new car, it’s best to involve your recipient in the car-buying process to guarantee they like their gift and can afford its ownership costs.
- You’ll have to perform an Indiana title transfer to gift a used car—but there are a few other steps, too!
- Gifting vehicles are exempt from sales tax in Indiana, but the gift-giver may need to pay a gift tax if the car’s value is greater than $17,000.
- If you’re gifting a new car, it’s best to involve your recipient in the car-buying process to guarantee they like their gift and can afford its ownership costs.
- You’ll have to perform an Indiana title transfer to gift a used car—but there are a few other steps, too!
Gifting a car vs. selling it for $1 in Indiana: which is better?
Gift the car: Gifted vehicles are exempt from sales tax in Indiana, whereas purchased vehicles typically are not.
As of 2023, you can only give up to $17,000 per recipient as a single individual without having to report the gift in your taxes. Once you exceed this amount, there’s a slim chance you’ll have to pay a gift tax between 18% and 40% of the gift’s fair market value.
Therefore, there’s not much of a reason to sell a vehicle for $1 rather than gifting it outright in Indiana—especially since many gifted cars don’t exceed $16,000 in value anyway.
Keep in mind: Selling a vehicle ends up costing your giftee more in taxes, too. In Indiana, the recipient of a sold vehicle is responsible for paying a 7% car sales tax on the fair market value—even if it’s sold for $1.
How to buy a car as a gift in Indiana
If you aren’t planning the gift as a surprise, we recommend involving the recipient in the car-buying process at the dealership
This way, you can make sure they get a car that they’ll love and that’s also within their budget for other ownership costs:
Keep in mind: You can only gift a car if there are noliens on the car. This means all loans on the car will need to have been paid in full to transfer the title from your name to the recipient's name.
Involving your giftee in the car-buying process also allows you to coordinate car financing. You can still take financial responsibility for paying off a
car loan
, but both of your names can be listed on the associated documents, including the title and vehicle registration
.How to gift a used car in Indiana
You can also
transfer the title
of a vehicle you already own to your recipient. Check off the following steps before handing over your used car:- Pay off your loans: Having outstanding loans on your title makes the gifting process pretty tricky. Contact your lienholders to get the liens removed before you give the vehicle away.
- Negotiate the terms of the gift with your recipient: Even if the gift is intended as a surprise, you’ll still need to discuss finances with your giftee. Figure out who will cover the title transfer fees as well as the regular costs of car ownership.
- Record the gift with a bill of sale: Indiana doesn’t require bills of sale for title transfers, but they make good supporting documents. You can either useBMV’s bill of sale templateor you canwrite your own bill of saleincluding your and your giftee’s names and signatures, your vehicle’smake/modelandVIN, a $0 purchase price, and your address.
- Transfer the vehicle title: Fill out and sign the back of your title as the “seller”, your recipient as the “purchaser”, and the “selling price” as “gift”. You can use anOdometer Disclosure Statementand a Bill of Sale to supplement your information if needed.
- Fill out a sales tax exemption form: Your recipient will need to fileIndiana’s Certificate of Gross Retail or Use Tax Exemption (ST-108E)form with their local BMV to avoid paying sales tax on a gift car. Direct relatives (spouse, parent, grandparent, children, siblings) can also file this form to avoid payingsales taxon non-gifted transfers of ownership.
- Purchase car insurance: Your recipient will also need to buy aliability car insurancepolicy that adheres toIndiana car insurance laws.
- A $15 retitling fee when gifting a car,
- A $15 duplicate title fee, if applicable
- A $25 expedited vehicle title service fee, if applicable
Once the title is signed, your recipient can fill out
Indiana’s Application for Certificate of Title
form. They will then need to take the title, title application, and proof of Indiana residency
and identity to the BMV, where they’ll be charged the $15 title transfer fee.As soon as a BMV agent has officially transferred your title, your giftee can then register the vehicle immediately after. They will need to have
proof of insurance
at this time and pay the $21.35 registration fee. Keep in mind: The recipient will face a $30 late fee if they fail to retitle the vehicle within 45 days. Call your local DMV to figure out the exact cost of gifting your car
Here’s a table of the major costs you and your giftee should consider:
Cost | Indiana average |
|---|---|
Title transfer | $15 |
Registration fee | $21 |
Insurance | $1,441 (liability only), $1,639 (full coverage) per year |
Maintenance | $1,188 per year |
Fuel | $3,000 per year |
How to gift a car to a nonprofit in Indiana
Gifting a car to a nonprofit is considered a donation instead.
Donating a car in Indiana
will follow a separate process—and you could earn a tax deduction between $500 and $900! “Jerryquoted me a price that saved me almost $4000 a year in Indiana! I definitely recommend Jerry.” —Patricia B.
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Do you have to pay taxes on a gifted car in Indiana?
Under Indiana law, you’re not required to pay tax on a vehicle you receive as a gift.
Is it better to gift a car or sell it for $1 in Indiana?
There’s a reason why the Indiana BMV has a process for gifting vehicles. If you’re not planning on selling your car at a fair market price, gifting it is the safest and most legitimate way to transfer your vehicle’s title to another owner.
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