There may be issues if a parent doesn't formally transfer ownership of a vehicle to a grown child who's no longer living in the family home. WHY TRANSFER OWNERSHIP? It's important to protect yourself by transferring ownership of vehicles to grown children after they leave the house.
For tax year 2024, gift tax rules apply if the vehicle's fair market value is over $18,000. Gifts exceeding the $18,000 annual exclusion count against your lifetime exclusion, which currently is $13.61 million.
How much can you give? As of 2024, you can give an adult child up to $18,000 in a year before you must file a gift tax return. If your adult child is married, you can also give up to $18,000 to their spouse.
Gifting is usually simpler and avoids potential issues with sales tax. Since the car is already in your possession and you both are family members, this process is straightforward and likely the least expensive.
Complete an affidavit of motor vehicle gift transfer form
Along with the title documentation, some states require additional proof of ownership. By filling out an affidavit of motor vehicle transfer form, you will give full legal ownership to the new owner. Contact your DMV and request the form.
According to Carbrain, you may or may not have to pay taxes when you give or receive a car as a gift. It all depends on what state you live in. California residents who are gifted a vehicle can apply for a tax exemption at the Department of Motor vehicles.
Bottom Line. California doesn't enforce a gift tax, but you may owe a federal one. However, you can give up to $19,000 in cash or property during the 2025 tax year and up to $18,000 in the 2024 tax year without triggering a gift tax return.
There is no age limit for how long you can claim adult children or other relatives as dependents, but they must meet other IRS requirements to continue to qualify. Additionally, once they are over 18 and no longer a student, they can only qualify as an "other dependent," not a qualifying child.
Trusts can be written for minors or for adults, with the distribution of funds outlined in the trust agreement. “A trust is a good vehicle to clearly establish your intent for your gift while also functioning as a means to reduce the size of your taxable estate for the future," said Goldman.
What is gift tax? A federal tax called the gift tax is assessed on transfers of cash or property valued above a certain threshold. Gift tax is paid by the giver of money or assets, not the receiver.
Register the car in your child's name.
While it may be easier to hand off one of your cars to your college student, try not to do so without transferring ownership of the car into your son or daughter's name on the car registration.
The fact is, parents can keep children on the family auto insurance policy for as long as they want, but it might not always make financial sense.
Share: Generally, the answer to “do I have to pay taxes on a gift?” is this: the person receiving a gift typically does not have to pay gift tax. The giver, however, will generally file a gift tax return when the gift exceeds the annual gift tax exclusion amount, which is $18,000 per recipient for 2024.
If you're still a dependent of your parents and they're paying for your higher education--room and board for example--this isn't considered a gift. A transfer of $100,000 to you directly is considered a gift and may be taxable to the giver.
May I deduct gifts on my income tax return? Making a gift or leaving your estate to your heirs does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions).
If the value of the car, when you gift it, is more than $16,000, you have to file a federal gift tax return, Form 709. You will not have to pay any gift tax unless the total of all gifts you have made in your lifetime is more than $12 million, but you have to file the return.
Bottom Line. The exclusions to the federal gift tax mean you can probably give $50,000 to each of your children without owing any tax. Since a gift of that size is more than the current annual exclusion of $18,000, you would have to file Form 709 to report the gift to the IRS.
The IRS allows you to gift up to $18,000 in money or property to an individual each year without having to report it to the IRS (for the tax year 2024). Even if your gifts exceed $18,000, it's still unlikely you'd have to pay taxes unless you've surpassed the lifetime gift tax exclusion ($13.61 million in 2024).
You're minutes away from saving on your car loan. Gifting a car is a better option than selling it for $1 in California, since vehicles given as gifts aren't subject to taxes.
Donating a car to charity can still be financially beneficial to you even if your car requires major repairs. These cars are auctioned off to one of Vehicles for Change's partners. As far as taxes, the donor can deduct the selling price of the car. This is typically 1/3 to ½ of the car's fair market value.