How To Donate A Car To Someone

How To Donate A Car To Someone

How to Donate a Car to Someone in Need: A Step-by-Step Guide:

Planning to give your car to a friend? Whether you are upgrading to a new vehicle, no longer need your current one, or just want to do something kind for someone close to you, gifting a car can be a generous and meaningful gesture. It is a great way to help out a friend who might need reliable transportation, but before you hand over the keys, there are a few important things to remember.

Giving away a car is not as simple as parking it in their driveway and saying, “It is yours.” Legal and financial responsibilities are involved, and you will need to handle the transfer properly to avoid issues later. From signing over the title and handling registration to understanding potential tax implications, the process includes several steps that must be completed correctly.

Some people think they can sell the car for $1 to avoid gift taxes, but this strategy can cause more problems than it solves. The paperwork is still required, and the recipient may still have to pay sales tax based on the car’s fair market value, not the symbolic $1 price.

Whether you are giving your car to a best friend, helping someone in need, or simply paying it forward, it is important to follow the correct process. This guide will walk you through everything you need to know about how to give away a car to a friend legally, safely, and with peace of mind.

What to Know Before Gifting a Car To Someone

Below is what a gifter should know before gifting a car to a friend:

Gift Taxes:

• In most cases, the person receiving the car won’t have to pay gift taxes. However, if the car is worth more than $19,000, the value above that amount may count toward the recipient’s lifetime gift tax limit.
• While most states do not charge tax on gifts, Connecticut is an exception, so it is important to check your state’s rules.

Paperwork:

• Transferring ownership of a vehicle requires formal paperwork.
• Most states will ask you to transfer the car title and fill out a bill of sale.
• If the vehicle is a gift, you can usually list the purchase price as “$0” on the bill of sale.
• Some states also require you to document the car’s fair market value or prove a family relationship when gifting the vehicle.

Insurance Requirements:

• Except in New Hampshire, all states require vehicles to be insured before they can be registered.
• Minimum coverage levels vary by state, so the recipient will need to meet their state’s insurance standards before hitting the road.

Gifting Across State Lines:

Gifting a car to someone in a different state comes with extra steps:

• Vehicle inspection and emissions standards vary by state.
• Some states require notarized title transfers.
• Taxes may apply when transferring a vehicle across state borders.
• The recipient may owe registration taxes, even if the car was previously registered elsewhere.

Liens:

• Any outstanding loans or liens must be paid off before you can legally transfer the car’s title.

Affordability:

• Make sure your friend can afford the ongoing costs of insurance, maintenance, fuel, taxes, and possibly parking.
• A gifted car is generous, but it still comes with financial responsibilities.

How To Donate A Car To Someone

Below is a step-by-step guide on how to give away a car to a friend:

Decide if Gifting a Car Is the Right Choice:

Gifting a car is a generous and exciting gesture, but it is important to think about whether it is truly the right gift for your friend. Owning a car comes with ongoing costs: fuel, insurance, maintenance, and repairs. According to Bankrate’s 2024 Hidden Cost of Car Ownership Study, the average yearly cost of owning a vehicle is over $12,297.

Before giving the car, ask yourself:

• Can your friend afford the long-term upkeep?
• Do they have a safe place to park or store the vehicle?
• Most importantly, do they need a car?

Giving someone a car that becomes a financial burden could cause more stress than good, so consider their situation carefully.

Get the Vehicle Ready to Gift:

If you already own the car and it is fully paid off (with no outstanding loans or liens), you are ready to move on to the next step. But if you are purchasing a car specifically to gift to someone, there are a few things you need to do first.

Dealerships usually require proof of insurance before you can take the car off the lot. In this case, you have two options:

• Temporarily add the vehicle to your insurance policy.
• Ask your insurance provider for a binder, a written or verbal statement that temporarily confirms coverage until the official policy is in place.

Bill of Sale – Gifted Vehicle:

This Bill of Sale is made on this ___ day of ________, 20, by and between:

Seller (Donor):

• Full Name: _______________________________
• Address: _______________________________
• Phone Number: __________________________

Buyer (Recipient):

• Full Name: _______________________________
• Address: _______________________________
• Phone Number: __________________________

Vehicle Information:

• Make: __________________________
• Model: _________________________
• Year: __________________________
• Color: _________________________
• Vehicle Identification Number (VIN): __________________________
• Odometer Reading: _____________ miles

Payment Details:

• The vehicle listed above is being transferred as a gift. The total purchase price is $0.00. No monetary exchange occurred for this transfer.

Terms and Conditions:

• The Seller affirms that they are the lawful owner of the vehicle and that it is free of all liens and encumbrances.
• The vehicle is being transferred as-is, with no warranties, expressed or implied, by the Seller.
• The Buyer accepts the vehicle as-is and assumes all responsibilities from the date of transfer.

Signatures:

• Seller’s Signature: ___________________________
• Printed Name: ___________________________
• Date: _______________
• Buyer’s Signature: ___________________________
• Printed Name: ___________________________
• Date: _______________

Transfer the Title:

Once the Bill of Sale is signed, do not forget to transfer the vehicle title. This step makes the gift official in the eyes of the law. You will usually need to fill in:

• The date of the gift
• The odometer reading
• The recipient’s name and address
• The sale price (enter “$0”)

Some states also require notarization and/or a gift affidavit. Be sure to check your DMV’s website for exact steps.

Complete an Affidavit of Motor Vehicle Gift Transfer:

In some states, simply transferring the title is not enough. You may also need to complete an Affidavit of Motor Vehicle Gift Transfer to legally confirm that the car is being given as a gift, not sold. This document helps establish that the transfer was made without payment and prevents issues with tax or registration later on.      How To Donate A Car To Someone

To get started, contact your state’s Department of Motor Vehicles (DMV) or visit their website to download the correct form. While the format can vary by state, you will need to provide:

• Your name and address (as the donor)
• The recipient’s name and address
• Vehicle details like the VIN, make, model, and year
• Confirmation that the transfer is a gift with no payment involved

In some cases, this form may need to be notarized to be valid. | How To Donate A Car To Someone

Fill Out the Right Tax Forms:

Once the paperwork is complete, the last step is to handle any tax obligations tied to gifting the vehicle.

At the state level, tax rules can vary. Some states may waive sales tax for gifted vehicles, especially if you complete the necessary gift transfer form. Search online for your specific state along with “gifting a car” to get up-to-date details.

• At the federal level, the IRS requires you to file a gift tax return (Form 709) if the value of the car pushes your total gifts to one person above $19,000 in 2025.
• However, this does not mean you will owe taxes. The excess simply counts toward your lifetime gift tax exemption (which is $13.99 million as of 2025).

So, unless you are giving away millions, you probably won’t owe the IRS anything, just paperwork.

Gifting a Car vs. Selling It for $1

Some people try to avoid gift tax paperwork by selling the car to a friend or family member for just $1. While it might seem like a smart shortcut, it is usually not a good idea.

• Even with a $1 sale, you will still need to go through all the legal steps, like transferring the title and filling out the proper forms. On top of that, the recipient may be on the hook for sales tax, not based on the $1 sale price, but on the car’s actual market value. That could result in a hefty tax bill.

In most cases, it is simpler and more transparent to officially gift the car and complete any required gift documentation. This way, both parties avoid confusion, and it’s often easier to explain to the DMV and tax authorities.

Giving away a car to a friend is a generous and meaningful gesture, but it comes with important legal, financial, and tax responsibilities. From transferring the title and filling out a bill of sale to meeting insurance and registration requirements, each step ensures the process is smooth and legal. Avoid shortcuts like selling the car for $1, and follow your state’s specific rules for gifting vehicles. Visit the Official Website For More Details.