My daughter is leaving the nest this summer if all goes well. I would like to transfer the ownership of the car she’s been driving so it will be legally hers. I have no idea what the mechanics of this are. Can someone explain how I do this? I’m concerned about creating a tax burden for her when I do this.

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Ukulele music I couldn't find anywhere else.
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Where is the car registered? How much is it worth?

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I don't know about the tax liability issue, but in WA state, you submit a transfer of ownership/loss of interest form. You're then relieved of any legal responsility for the car. If it's shown as a gift, there's no sales tax. YMMV.

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Show up at AAA or notary of choice with the title and they'll walk you through. Generally, you sell it for $1, fill out a form that affirms it is a gift. That way you avoid sales/use tax. YMMV in your state, though. Gift taxes won't apply at all if she is your dependent currently (and most common folk won't approach the lifetime threshold anyway.)



Edited 1 time(s). Last edit at 06/19/2022 10:54AM by Acer.

Toss her the keys

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“There comes a point where we need to stop just pulling people out of the river. We need to go upstream and find out why they’re falling in."

Depending on your state and the value of the car you may be limited to the amount you can give someone without incurring additional estate taxes. For 2022 that limit is $16000. States are all over the place on this question for state estate taxes/gift limits, and any answer will require research. Although it's unlikely that a car you give to a child will be worth more than the limit, if you give more in the same tax year or forgive more in loans in the same tax year, things get more complicated.

My understanding is you pay taxes on any gift over $15,000…federal. Don’t know about state because TX doesn’t have state tax.

Depends on the state where the car will end up with your daughter. We were about to do this assuming her last two years in Texas was stable, and then our daughter just got a new job in a different state, so we are doing those laws instead...

search your county's department of motor vehicles on how to transfer ownership of a vehicle to a family member.

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If you want to fix our country, work with us in the states. statesproject.org

"Success isn't about how much money you make. It is about the difference you make in people's lives."--Michelle Obama

What Acer said but I'll bet thatyou are hit up for state sales tax.

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graylocks
search your county's department of motor vehicles on how to transfer ownership of a vehicle to a family member.

This.
It depends totally on where you are, as to how you do it.

Georgia makes it pretty easy to transfer between family members. My MIL gifted her old car to my daughter and there were just a couple of forms to fill out and she had to get a new tag.

How your state does car taxes will vary greatly from state to state.

FYI, if the car is worth more than $16,000 you "should" file a gift tax return, if this gift is from just you. If it is from you and your wife, then the limit would be $32,000.

You will not owe any Federal income tax on the transfer, neither will your daughter. The amount of the gift, would just go on record as diminishing your total lifetime exclusion, at your death, which right now is at ~$12 million per individual, but changes as the whims of congress. It should most likely not drop below ~$5 million per individual.
Realistically, unless you are giving her a very expensive car, I doubt anyone would check, but if you want to follow the letter of the law, that's what you need to do.
Here is an article that might shed a little light. [www.forbes.com]
Hopefully the car is worth less than $16,000, so no worries.

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Roswell, GA (Atlanta suburb)



Edited 2 time(s). Last edit at 06/19/2022 12:44PM by rgG.

Also don't forget about insurance -

FWIW there are far more complexities possible for giving without taxes being involved.

[www.schwab.com]

(Consult an expert, I am not one nor do I play one on TV)

I “sold” my truck to my brother for $1.

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rgG

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graylocks
search your county's department of motor vehicles on how to transfer ownership of a vehicle to a family member.

This.
It depends totally on where you are, as to how you do it.

Here in MA it is the state motor vehicle registry, no county departments. No state sales tax on transfers between immediate family members - spouse, children, and siblings. Just a form to file and a $25 fee plus regular title and registration fees.

Transfers from non-immediate family such as grandparents, aunts, uncles, or cousins are not exempt from paying sales tax. That will be on the actual sales price or the vehicle's book value if gifted or made as a "$1" sale.

Yes, check out what Insurance will run if it is just her on the title.

In the past I have never had a car that was worth considering for Tax Purposes,,,, just less than 5k or 10k.., etc... Old Cars.

California:

You and the family member receiving the vehicle must both sign the title, and so must any lienholders. This is in addition to filing Form REG 166. There's a $15 DMV family transfer fee.

No smog check is required if you are buying or receiving a vehicle which is already registered in California from a spouse, domestic partner, sibling, child, parent, grandparent, or grandchild. These title transfers are exempt from a smog inspection and do not require a smog certificate when transferring title.

You could always “sell” it to her for whatever you want. She wouldn’t have to pay you. Avoid the gift issue altogether. AFAIK, there’s nothing preventing one from selling a vehicle way below market value.

Gifts over $16000 per person, per taxpayer would need to be reported for federal tax purposes.
But, only the amount over 16000 is a taxable gift.,
But but, each taxpayer has a 12.1 million lifetime gift exemption, You only owe taxes after you cross that initial exemption, and only on the overage.
But but but that's per gifting taxpayer, too, so for a couple you effectively double the above amounts.

By the way, the above reporting is supposed to be on the market value, not the family discount value. So I would not advise playing games with values to avoid taxes. That loophole is well known and accounted for in the tax code.

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Acer
Gifts over $16000 per person, per taxpayer would need to be reported for federal tax purposes.
But, only the amount over 16000 is a taxable gift.,
But but, each taxpayer has a 12.1 million lifetime gift exemption, You only owe taxes after you cross that initial exemption, and only on the overage.
But but but that's per gifting taxpayer, too, so for a couple you effectively double the above amounts.

By the way, the above reporting is supposed to be on the market value, not the family discount value. So I would not advise playing games with values to avoid taxes. That loophole is well known and accounted for in the tax code.

Yep, you have to file a return for anything over $16k but there will be no tax until you go over the lifetime exclusion. However, I find the return to be a pain because you have to list ALL your gifts to your child going back until, I believe, they turned 18; maybe even further back, I don’t recall.

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Saint Cloud, Minnesota, where the weather is wonderful even when it isn't.

Uncle? Give to sibling first, who then gives to child.
Grandparent? Give to child first, who then gives to their child.
Expensive car? Give half this year, other half next year.

That's why they call it "planning".... with, or without a will, there is is a way..... if/when you plan!
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Grandpa (my Dad) 'gave' his car to my daughter. AAA recorded it as a $1 sale (with tax) and charged some random registration fees. Same when I sold my old car to her younger brother.

State of PA. YMMV.

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Embarassing myself on the Internet since 1978.