How to Give a Car As a Gift: A Guide with Gift Tax Rules

A car is one of the best presents one can ever make. However, before you give the keys to the happy new owner, you need to learn about all the legal and tax-related aspects of such a gift. Whether you want to give a car to a family member or a close friend, you need to follow the correct procedure to protect yourself and the recipient from future problems. Here's your comprehensive guide on how to gift someone a car in the U.S.

You cannot just give a person the keys and say, "It's yours now." The process of ownership transfer requires specific documentation, signatures of the presenter and receiver, and, in most states, a visit to the DMV. In many ways, it is similar to the sales-purchase deal, but the only difference is that there's no exchange of money.

Remember that every state can have different requirements for the gifting procedure. To clarify them, visit the local DMV.

Both the giver and recipient must complete the essential documentation on the gift car:

More than 30% of American teenagers receive their first car from parents or an older sibling. Many states offer tax exemptions or reduced fees if you transfer car ownership to your relatives.

Here's how to do it correctly:

A common question is also "Do I need a bill of sale for a gifted car if the recipient is my relative?" Yes, even if you transfer the ownership to your parent, spouse, or child, you still need to sign a car bill of sale with a zero sale price.

Transferring the car ownership rights to a person who is not your relative is more complicated. 

Follow these steps:

According to the IRS, in 2025, the maximum amount you can give to a person other than your spouse per year without incurring a federal tax obligation is $19,000. If the vehicle is valuable, you may need to file IRS Form 709.

Besides, DMV offices might apply sales tax when a car is given to a non-relative, especially if they suspect it was actually not gifted but purchased without paying taxes.

As the laws and taxes differ in various jurisdictions, before presenting a car to a person living in a different state, you should check both the regulations of your state and the one in which the receiver lives.

Here are the key documents to prepare:

The recipient must register the vehicle in their home state and pay all applicable fees and taxes.

Each jurisdiction has different rules regarding how gifted vehicles are treated. For example, Florida may tax it unless the giver has already paid sales tax elsewhere, while Missouri generally allows exemptions for such presents if they are clearly documented.

The general rule is that, even when a car is given for free, it is treated like a sale when taxes are calculated. The final sum depends on:

At the federal level, if a car's fair market value exceeds $19,000 in 2025, the giver may be required to file a gift tax return. This doesn't automatically mean you'll have to pay tax, especially with the lifetime exclusion of $13.61 million. However, if the car is very expensive, you may be asked to pay.

However, these states do not charge sales or use tax when the car is given to qualifying family members: 

Meanwhile, Texas charges $10 gift tax for all car ownership transitions between family members.

Gifting a car is a complex legal process that requires attention to the slightest details. Gather the main documents, contact the DMV for additional details, and study local regulations to ensure the joy of making and accepting the 4-wheel present will not be spoiled by legal troubles. 

Article by Karina Pukaniuk

Karina Pukaniuk is an accomplished Tax and Corporate Lawyer with a strong legal background in international structuring, personal data protection, and intellectual property law. She has extensive experience in M&A transactions, corporate restructuring, and developing cross-border strategies across multiple jurisdictions. At Loio, Karina contributes to the creation and review of legal templates and guides, ensuring they are accurate and compliant with U.S. legal standards.