How to Give a Car As a Gift: A Comprehensive Guide

If you’ve purchased a car as a gift for a loved one or want to give your current car as a gift to a family member, you’ll need to make sure you fully own the car and that there are no liens against it. Most states require a bill of sale, even if you’re giving it to someone, and sometimes will waive certain taxes.

Ownership and Legal Considerations

Every state has different requirements for transferring the title of a car, so it’s important to understand your state’s process and requirements. In all states, you can only transfer the title of a car as a gift if you hold the title. There can be no liens against the car, meaning you must have paid off the auto loan in full and have a title with no claims to it.

Liens

A lien is a claim to an asset by a party other than the owner. For example, imagine the vehicle loan is paid off, but you used it as collateral for a small personal loan. The car has a lien against it.

Alternatively, think about a situation where you bring your car in for some servicing. If the repair shop does the work but you’re unable to pay, they may have what’s called a mechanic’s lien. A mechanic’s lien means the repair shop has a claim or a right to recover what they are owed, and they possess that right through collateral (i.e., the car they just fixed).

Unless you’ve paid that loan off, there is a claim to the car, and the title cannot be transferred until it’s paid and the lender releases the lien.

Gift Taxes

Most states do not collect gift taxes (only Connecticut, which follows the federal gift tax law, with a few exceptions). Federally (and in Connecticut), you’ll need to include the car’s value in your lifetime gift tax exclusion amount if the value is more than $19,000 ($18,000 for 2024). However, the total lifetime exclusion amount is $13.99 million (in 2025, up from $13.61 million in 2024), an amount most people will never reach.

If the car is worth more than $19,000 or your total gift amount to one recipient is more than the annual exclusion amount, you’ll need to file IRS Form 709 when you file your annual taxes.

Preparing the Car

While not a legal requirement when giving a car as a gift, it’s a nice gesture to ensure it’s up to date on periodic maintenance (if not brand new), like an oil change, new tires, new brakes, and to have it professionally cleaned.

If there are any issues or required maintenance, make sure you’ve corrected them or included them on the bill of sale and that the recipient agrees in writing to the condition the car is in, even if it is a family member.

Documentation and Paperwork

Cars are considered titled property, so paperwork must be completed to ensure you’re following your state’s legal procedures. Many states require a bill of sale and the appropriate paperwork to transfer the title.

Creating a Bill of Sale

In a private sale, a bill of sale for the car generally includes the names and addresses of both parties. The vehicle identification number should be listed, as well as the mileage. The car’s condition and any agreements about the condition should be documented on the bill.

It’s a good idea to include the fair market value of the car on the bill, even though you’re giving it to the recipient. This can help with any legal issues that might occur down the road.

Transferring the Title

Each state will have different requirements for its title transfer process. However, most states require, at a minimum:

• A title transfer form and fee
• The original title, filled out on the back by both parties
• Proper identification
• Proof of insurance, and safety or pollution inspections, as applicable, for registration

State-Specific Considerations

Most states have similar title transfer processes, but there are slight differences. Here are a few:

• Some states, like North Carolina, charge highway use taxes when a vehicle is registered, but if the car is a gift from parents, a spouse, or a stepparent, the tax is waived.
• Required paperwork is different in every state. For example, California requires that the vehicle’s estimated market value be included on a Statement of Facts about the vehicle.
• If the gift is in one state and the recipient is in another, state laws will determine how the gift is treated. Depending on who you gift the vehicle to, there will be title transfer or other fees and possibly sales taxes.
• If the recipient is family but has a different last name, you may need to provide proof of familial relationship.
• Vehicle inspection requirements differ by state, so if the vehicle is going to be registered in another state, it’s best to ensure it meets that state’s requirements.
• Some states might require the title transfer request to be notarized and/or a witness to be present and sign the documents.

Insurance and Registration

All states except one have minimum auto insurance requirements on vehicles, and most require it to be purchased before they are registered. This means that when you transfer the title of the vehicle to the recipient, they will need to ensure they have the minimum auto insurance required by your state before they visit the DMV to register it.

Depending on the state, it’s possible to have the insurance already set up with an insurance provider, so that the title transfer and registration can be done in one visit to the DMV.

Donating a Car

Donating a car to a charity organization can help someone in need and provide you with several benefits. However, there are some factors to consider:

• Research the charity you’d like to give the car to, making sure they are tax-exempt and meet 501(c)(3) qualifications.
• You can claim the donation as a tax deduction, but you can only deduct the amount the charity receives when they auction or sell the car
• If it sold for more than $500, you’d need to fill out IRS Form 8283 and receive a written acknowledgment from the charity. If its value is more than $5,000, you must include a written appraisal with your tax filing.
• The title will need to be transferred to the charity, following your state’s laws and fee schedule

The Bottom Line

There are a few tasks to complete if you’re giving a car as a gift. State title transfer, insurance, and tax laws dictate what you need to do and whether there are any financial concerns. When you’re considering giving a car to someone, be sure to check with your state’s Department of Motor Vehicles to make sure you’re doing it the right way and setting them up for a successful and enjoyable experience.