Quick Tips About Gifting a Car
- Verify ownership and ensure all liens are cleared before transferring a gifted or inherited car to avoid legal complications.
- Draft a bill of sale and transfer the title at your local DMV to legally document the change in ownership and fulfill state requirements.
- Understand gift and inheritance tax rules, as well as any state-specific laws, to ensure compliance and avoid unexpected financial obligations.
If someone has given you a car, there are some steps you’ll need to take to retain ownership legally. Whether you plan to keep the vehicle and start driving it right away or you want to sell an inherited car for cash, this guide will help you follow the due process.
Details will vary according to local laws. Additionally, the process may be more complicated if the grantor and the recipient are in different states. Consult your state’s Department of Revenue or equivalent to confirm the specifics surrounding inheriting a car.
- Verify Ownership
- Draft a Bill of Sale
- Transfer the Title
- Gift Tax
- Inheriting a Car When Someone Dies
- Bottom Line on Gifting Cars
Verify Ownership
The first step is to make sure the bestower truly owns the vehicle. To legitimately transfer ownership, the giver must fully own the car with any loan paid off. There can be no liens or other legal claims on the asset. You can verify ownership by reviewing the physical title. Ensure the vehicle identification number (VIN), make, model, name, and address are correct.
Draft a Bill of Sale
Even if someone is giving you a car, there should still be a paper trail outlining the initial transfer of ownership. A bill of sale can help protect both parties if there’s an issue verifying the agreement in the future.
The person gifting the car and the recipient must both sign this document, and it should include the vehicle’s make, model, and VIN. Additionally, have the current odometer reading and the vehicle’s sale price (set to $0 in the case of a gift or if you inherited a car).
MORE: VIN Decoder: The Essentials Explained
How Do I Give a Car as a Gift?
If you’re planning to give someone a car as a gift, there should still be a paper trail outlining the initial transfer of ownership. Draft a bill of sale to help protect both parties if there’s an issue verifying the agreement in the future. Moreover, be sure the recipient is able to handle the responsibility of car ownership.
Transfer the Title
Next, as the recipient, visit your local Department of Motor Vehicles (DMV) to apply for a title in your name. Most states require a “gift affidavit” in addition to typical title transfer paperwork. Submit the bill of sale as proof of ownership and pay the fees associated with the title transfer. An odometer disclosure may be required. Once the title transfer is complete, the car is yours and your responsibility.
Register the Gifted Car
A car title shows ownership. Registering the vehicle allows you to legally drive it. Many states have reduced registration fees for cars that have been given to a family member. However, it is crucial that you consult your state DMV to understand your obligations because some states levy taxes based on the value of gifted cars, even if the person registering the car didn’t purchase the vehicle. Proof of insurance and passing an emissions inspection may be required.
RELATED: Car Title Guide: Everything You Need to Know
Gift Tax
According to the Internal Revenue Service (IRS), a gift tax is assessed on “the transfer of property by one individual to another while receiving nothing, or less than full value, in return.” While all givers must disclose gifts over a certain amount, the good news is that most people will never need to pay the tax.
For tax year 2025, gift tax rules apply if the vehicle’s fair market value is over $19,000. In most cases, you must file IRS Form 709 if you give gifts to someone in 2025 totaling more than $19,000. Gifts exceeding the $19,000 annual exclusion count against your lifetime exclusion, which currently is $13.99 million.
Let’s say you gift a vehicle worth $25,000 to your cousin. Use our car value tool to check how much it’s worth on the fair market. The extra $6,000 ($25,000 – $19,000) counts toward your lifetime exclusion. You’ll need to file a gift tax form even though you won’t owe taxes until you exceed the lifetime gift threshold. Taxes can be tricky, so we recommend consulting your tax professional when you’re thinking about gifting a car.
In most cases, recipients are not responsible for a federal tax on a gifted car.
Inheriting a Car When Someone Dies
If you inherit a car when someone dies, you should contact an estate lawyer for legal advice on how this process works in your state. Laws may differ if you live in a different state from the deceased:
- Review the will. Confirm how the deceased person’s assets (including the vehicle) will be distributed. The court will appoint an administrator to handle the estate if a will is not in place.
- Transfer the title. Once the probate process is complete and you’re legally confirmed as the rightful vehicle recipient, you must transfer the car’s title. Complete the required title application forms and submit them to your local tag office with the following documents: the original title in the deceased’s name, certified inheritance documents, a copy of the deceased’s death certificate, transfer documents from the probate court or executor, and applicable title fees.
- Pay the inheritance tax. While there is no federal tax on inherited assets, some states will assess tax on a vehicle that was willed to you. Confirm these details with your local tax office and review your payment options.
- Register the vehicle. With the title transferred and other paperwork complete, register the car in your state. Many states have reduced registration fees for inherited vehicles.
MORE: How to Buy a Car From Out of State
Bottom Line on Gifting Cars
Transferring ownership of a gifted or inherited car requires careful attention to legal details, including verifying ownership, drafting a bill of sale, transferring the title, and understanding relevant tax obligations. By following the proper steps and consulting local authorities or tax professionals when needed, you can ensure the process is smooth, compliant, and stress-free, whether you plan to keep or sell the vehicle.
Editor’s Note: This article has been updated since its initial publication. Chantel Wakefield contributed to the report.