Gifting a vehicle is generous of you! Since gifting a vehicle is not the same as purchasing a vehicle outright or leasing a vehicle, there are specific documents and a DMV gift car process you need to take to correctly gift a vehicle to a non-family member.
Gifting a Car to a Non-Family Member
When you’re gifting a car to a non-family member, regardless of the state in which you reside, you are required to follow a series of steps.
Pay Off Your Vehicle Loan
You can’t gift a vehicle to someone or transfer the title of the vehicle if you don’t own the vehicle outright. If there is an outstanding balance on your vehicle’s loan, you need to pay off the loan. Once you pay the vehicle loan in full, contact your lender to ensure everything is situated the way it should be.
Consider the Giftee’s Financial Situation
When you gift a vehicle to someone, you need to keep their financial situation in mind. Once the car is gifted, the person you gift the vehicle to is responsible for paying for insurance, maintenance and repairs, gas, and other instances that pertain to the vehicle.
Paying the Gift Tax
When you gift a vehicle, you could be responsible for paying the gift tax. The gift tax and the requirements for gifting a vehicle can change on a yearly basis, but in general, if the fair market value of the vehicle exceeds $15,000 for a single individual, or $30,000 for a married couple, you may be required to pay a gift tax on the vehicle. The gift tax on a vehicle can be anywhere between 18% to 40%.
Paying Sales Tax
If you own the vehicle, you don’t have to worry about paying the sales tax. Vehicle sales tax varies by state. However, vehicle tax is often a pretty penny. So, for example, if your current residing state’s vehicle tax is 10%, and you decide to gift a vehicle that is worth $20,000, you can initially save $2,000 on sales tax. Keep in mind, if you purchase a vehicle, then gift it, you are required to pay sales tax on the initial purchase.
Create a Bill Sale
Without a bill of sale or a contract, you could still be held responsible for the vehicle you gifted. The bill of sale is there to protect you legally. You need to make sure the bill of sale is signed by you and the person receiving the vehicle. The bill of sale needs to include the:
- Odometer reading
- Make and model of the car
- Vehicle Identification Number (VIN)
- Purchase price of the vehicle
Transferring the Vehicle’s Title
In order to release full ownership of the vehicle you’re attempting to gift, you need to transfer the vehicle’s title. You need to visit your local DMV branch, pay all applicable fees, and complete the necessary paperwork to successfully complete the vehicle title transfer process for your state.
Insure the Giftee
The person receiving the vehicle can’t legally operate the vehicle unless the vehicle is insured. If the individual already has a valid auto insurance policy, they can contact their auto insurance provider and add the gifted vehicle to their insurance policy. If they don’t have auto insurance, they will need to obtain an auto insurance policy before they can legally drive the vehicle in any state.
IRS and Vehicle Gift Deductions
Be advised, not all gifting situations are deemed for a tax write-off. According to the Internal Revenue Service (IRS), you are not allowed to deduct the value of gifts you make, other than gifts that are deductible charitable contributions.
Required Documentation to Gift a Car
There are specific documents that are required to successfully transfer the title of a car. You need to make sure these documents are completed to prevent unnecessary penalties and delays. Here are the forms you need to transfer the title of a vehicle:
Vehicle Title
The vehicle’s title is presented in the form of a physical, legal document. The car title is designed to prove who owns the vehicle. The person who has the vehicle title in their possession, and is named as the owner of the vehicle, is the owner of the vehicle. Vehicle titles apply to SUVs, trucks, and RVs. One way you can think of a car title is like the deed to a home.
Who Can Obtain a Car Title?
A vehicle title is not a limited document, so, just about anyone can possess a vehicle title. Government entities, businesses, and other individuals can also own vehicle titles.
What Information Is Present On a Vehicle Title?
A car title possesses a lot of essential information that involves more than the vehicle owner’s name. The specific information that is present on a vehicle title will vary by state, but the standard information that is provided on a vehicle title includes:
- Vehicle Identification Number (VIN)
- Vehicle make
- Vehicle model
- License plate details
- Value of the vehicle (when the car is new)
- The tax value of the vehicle (at a certain date)
- Gross vehicle weight (GVWR)
- Vehicle’s horsepower
- Personal information (name, address, and status of ownership)
If you don’t fully own a vehicle, and a lien holder is involved, the lien holder will also be named on the vehicle title. The lien holder is the company that has money owed to the titleholder to purchase the vehicle. The lien holder is often a car dealership or bank.
Who Creates Car Titles?
A vehicle title is not issued by the seller or manufacturer of the vehicle. You may also think your state DMV issues vehicle titles, but they don’t. Surprisingly, the Secretary of State issues vehicle titles and approves and assigns them. Although the DMV plays a role, they are not the organization that creates a vehicle title.
What Happens If You Lose The Vehicle Title?
Your vehicle title is an essential document. Without a vehicle title, you can’t sell or transfer the ownership of the vehicle. The good news is, you can request a duplicate vehicle title. A lot of states allow you to download an application for a duplicate vehicle title. You can download the application, print it out, fill it out, and submit it at your local DMV branch.
Bill of Sale
You can think of a bill of sale like an invoice and receipt in one document. The bill of sale is a record of a sale or other transaction, and it includes specifics about the vehicle or other goods.
Who Needs a Bill of Sale?
Some states require a bill of sale for vehicle title transfers and vehicle registrations, while other states don’t. Anyone who purchases or sales a vehicle must have a bill of sale, even if its sole purpose is to be kept as a record. A bill of sale is often used in a private used car market. Vehicles that are purchased from a dealership don’t have to worry about an abundance of paperwork because the dealership handles the required paperwork.
What Does a Bill of Sale Do?
A bill of sale does a few different things. This document shows proof that the original vehicle owner sold the vehicle to an individual who is now the new car owner. The bill of sale also provides a record of the vehicle’s sale price and date. This important document helps the DMV calculate all necessary fees.
How Do You Complete a Bill of Sale?
Completing a bill of sale is not as difficult as you may think. The good news is, these steps are self-explanatory. To complete a bill of sale, you need to provide:
- The vehicle seller’s information (name, address, driver’s license number, phone number, and signature)
- The vehicle buyer’s information (phone number, address, driver’s license number, and signature)
- Information regarding the vehicle (make, model, year, and Vehicle Identification Number (VIN)
- The vehicle’s sale date and price
- The bill of sale must be notarized
In general, the seller of the vehicle will keep the bill of sale for their records. The vehicle’s buyer will take a copy of the bill of sale to their local DMV office or other state motor vehicle agency, such as the motor vehicle department (MVD) and similar entities that handle vehicle title transfers.
Proof of Residency
The requirements for being considered a resident can vary by state, but in general, you must live in a state for 30 days or longer. In any event, when a vehicle is being gifted to an individual, they are required to provide proof of residency in their state.
Proof of residency is often proven by providing a utility bill in the individual’s name. However, there are other methods of proving residency. You can use these credentials as your proof of residency:
- Financial paperwork (credit card statements, bank statements)
- Tax records (W-2s or copies of your state or federal income taxes)
- Court or Government documents (correspondence from an official state, city, county, or other government agency. This document must include your name and address)
- Voter registration documents (some states may allow you to use your voter registration card as proof of residency if your address is present on the card)
- House-related paperwork (declaration page or other correspondence from your homeowner’s insurance company
- Other insurance policies (homeowner’s insurance, etc. The paperwork must be official)
- Vehicle Registration (as long as your registration is up-to-date)
- Your employment (you can use one of your actual pay stubs and NOT a copy of your pay stub. Your employer may be able to write a letter on your behalf.)
- Your Education (you can request an official transcript from your high school or university)
As long as your documents are up-to-date and valid, you may be able to use them as proof of residency.
Proof of Identification
When you need proof of identification, you can use your valid state-issued ID card or driver’s license. However, there are other documents you can use. There are primary identification and secondary identification documents you can use for proof of identification purposes. These documents include:
Primary Identification
- U.S. photo driver license or photo ID card
- Original or certified birth certificate
- An unexpired U.S. passport
- Marriage License/Certificate
- Federal Census Record
- Birth Certificate
- Adoptive Decree
- Legal Change of Name
- Any confirmation of date of birth in court of law
- Military Identification
- Active Duty, Retiree, Reservist military ID card (DD Form 2 or 2 A)
- Discharge papers (DD-214)
- Military Dependent ID card
United States Citizenship and Immigration Service
- Certificate of Naturalization N-550, N-570, N-578
- Certificate of Citizenship N-560, N-561, N-645
- Employment Authorization card (I-766)
- Northern Mariana Card
- American Department of Indian Affairs Tribal Card
- S. Citizen Identification Card (I-179, I-197)
- Temporary Resident Identification Card (I-688)
- Travel Documents Record of Arrival and Departure (I-94)
- Border Crossing Identification (I-586)
- Non-immigrant Visa/Border Crossing Card (DSP-150)
- S. Re-entry Permit (I-327)
- Refugee I-94 Record of Arrival and Departure stamped “Refugee”
- Refugee Travel Document (I-571)
- Canadian Immigration Record and Visa or Record of Landing (IMM 100)
- Canadian Department of Indian Affairs issued ID card.
Secondary Identification
Besides the primary forms of identification in the United States, there are secondary forms of identification as well.
- Computerized Check Stubs
- Must include the applicant’s full name pre-printed on the stub.
- Union Membership Cards
- These membership cards must include the applicant’s full name, preferably with photo and/or Social Security number.
- Work IDs
- Preferably with photo and/or Social Security number.
- Financial Institution Documents
- Computer printouts of bank statements, savings account statements, loan documents, etc.
- Social Security Documents
- Social Security Card (original only, not metal or plastic replicas)
- Printout or benefits statements, etc.
- Social Security Check or Direct Deposit Verification of Social Security Check
- Health Insurance Card
- TennCare, Medicaid, Medicare, etc.
- Health Insurance Card
- Insurance Policies or Payment statements
- IRS/state tax form
- W2 forms, Property tax receipts, etc.
- Military Records
- Assignment orders, selective service cards, Leave & Earnings Statement, etc.
- United States or Foreign
Gifting a vehicle to someone is an awesome gesture. If you’re receiving a vehicle, you’re one lucky person! Use this guide to help you legally gift or receive a gifted vehicle. Happy trails!
