Hello! I am a California residents, and am gifting a car to family. No state tax, but is there a federal tax I have to pay? (2024)

FAQs

Hello! I am a California residents, and am gifting a car to family. No state tax, but is there a federal tax I have to pay? ›

Bottom Line. California doesn't enforce a gift tax, but you may owe a federal one. However, you can give up to $18,000 in cash or property during the 2024 tax year and up to $17,000 in the 2023 tax year without triggering a gift tax return.

While California doesn't impose a sales tax on vehicle transfers between immediate family members, there is a nominal gift tax involved. The recipient is responsible for paying this tax, and it's calculated based on the car's fair market value.

It's a good idea to also have a bill of sale between you and the giftee, even if there's no payment made for the used car. A California bill of sale will record the transaction legally, protecting both the gifer and giftee. That's why both should sign the bill of sale, certifying you agree to the gifted car terms.

Selling a vehicle for $1 instead of gifting it could result in your recipient paying sales tax based on the car's fair market value — it's better to stick with the official gifting process.

As of 2024, this exclusion is set at $18,000 per individual. This means that you can give up to $18,000 in cash or property to your son, daughter, or granddaughter individually without concern for tax implications. If you and your spouse make a joint gift, the exclusion doubles to $36,000.

Fees to Pay

You will need to pay a few fees when transferring a vehicle title in California. These include the $15 title transfer fee, the $25 smog transfer fee (if applicable), and any taxes and registration fees that may be due. Be sure to check with your local DMV office for specific fee information.

To transfer a vehicle between family members, submit the following: The California Certificate of Title properly signed or endorsed on line 1 by the registered owner(s) shown on the title. Complete the new owner information on the back of the title and sign it.

A family member gave me a car. Do I have to get a smog inspection? No. However, if you are given a car by a family member (a spouse, domestic partner, sibling, child, parent, grandparent, or grandchild) who bought it for you without first titling the car in their name, a smog inspection is required.

The Gifted Car Bill of Sale plays a crucial role in the gifting process. Ensure that you complete it accurately, as it serves as a legal document for transferring the car's title to the recipient's name.

Transfer of ownership between the seller and the buyer must be started with DMV within 10 days of the sale of the vehicle or boat. You will need: The California Certificate of Title. Signature(s) of the seller(s), buyer(s), and lienholder (if applicable).

Why California wants to give residents $1000 not to have a car? ›

“Not owning a car does not cause congestion, greenhouse gas emissions and air pollution. SB 457 incentivizes folks to not own a car, rewards them for that good behavior and provides them money for alternative forms of transportation.”

@ebarstad No, there is no tax benefit for gifting a car to an individual. There is no tax deduction for gifts.

You can essentially give any amount of money you like as a gift to family members, friends or other individuals – as long as you do not benefit from that action in any way.

Annual gift tax exclusion

The gift tax limit is $17,000 in 2023 and $18,000 in 2024. Note that this annual exclusion is per gift recipient.

If you never bring the car into the state, and/or if you immediately have it transported (not driven) out of state, you never have to pay California sales tax or register it here, even if you made the deal in California. If you pay another state's sales tax, California will credit that amount.