We’ve dreamed about it. Have you? Imagine … a sleek luxury car in your driveway with that big red (it has to be red, right?) bow on top!
If you’re thinking about giving a car as a gift this holiday, now is the time to get the details sorted out. You’ll want to consider a few practical realities before you tie that big red bow.
First of all, consider the recipient’s wants and needs. Is your loved one a starving college student? Or an opinionated spouse? Each might react to the gift of a car differently, particularly if it’s a hand-me-down or if it’s hand-picked according to your tastes (not theirs).
You’ll also want to consider the recipient’s finances. Can your loved one afford the insurance and maintenance of the gift? Or would it be better to offer help in another way? Another thing to keep in mind: If you’re giving this gift to someone outside of your immediate family, he or she may have to pay sales tax on the gift. Which might be kind of a let-down after the big reveal.
Finally, you’ll want to make sure you have your own ducks in a row. Do you own the car outright? Or will you need to satisfy payments or liens? If you co-own the vehicle with someone else, they’ll need to provide a signature. If the gift is part of an inheritance and the owner is deceased, you’ll need to involve a Probate Court. These considerations may not apply to you, but be aware! The last thing you want is to have this loving gesture become a logistical nightmare.
If you still relish the thought of surprising your loved one with a cool new ride, there are steps you should take. Keep reading!
Step 1: Locate the vehicle’s title. Remember that you must be the vehicle’s owner in order to gift the vehicle. If you need a replacement title, contact the DMV.
Step 2: Be sure to satisfy liens on the vehicle. Again, you must own the vehicle outright in order to give it or donate it as a gift.
Step 3: Fill out the transfer section on the back of the title. You’ll need your driver’s license and the odometer reading at the time of the gift. Be sure to include your signature! The recipient will fill out the buyer portion of the title. In the section that asks for the sale price, simply write “gift.”
Step 4: Check with your state’s Registry of Motor Vehicles for any additional requirements you may need to meet in order to gift your vehicle. Note: If the recipient lives in a different state, you’ll need to file the paperwork there.
Step 5: Once you give the gift, the recipient will need to demonstrate that he or she has automobile insurance.
Step 6: Finally, have the recipient take the paperwork to the DMV! Once the new car is registered, your loved one will get a new title.
Our nosy friends at the IRS want to know what you’re up to, whether you’re giving a car away to a friend, spouse, or charity. If you’re giving to a family member, you usually don’t have to worry about a sales tax. However, you may need to be prepared to pay a gift tax. As of 2012, the gift-giving limit is $13,000 per year, per person. If you’re married, you and your spouse can gift jointly up to $26,000 without incurring a gift tax. If you go over that limit, you may need to file a gift tax return.
Yes, it’s complicated and it changes from state to state, so be sure to check with a tax professional before you pick up that new car.
If, after reading, you’re determined to give a loved one a brand new car, let us know! We can help you ship that shiny new ride wherever it needs to go.