If you’re going to transfer ownership of a car—even to a family member—then it’s important to transfer the vehicle title as well. When transferring a car title to a family member, the process is similar to the title transfer process of a regular private party sale…with a few important differences.
If you own the car outright, you transfer ownership by completing a title certificate. After that, the new owner takes the certificate of title to a local DMV office and officially completes the transfer of ownership.
If you're gifting the automobile, you may need different paperwork to transfer the ownership, depending on your state.
Why is it Important to Transfer a Title?
A certificate of title establishes proof of ownership of a vehicle. It also allows law enforcement to determine who is liable if the car is involved in a crime or gets into an accident, by looking up the registered owner in Department of Motor Vehicles (DMV) records.
Whether you’re selling, gifting or donating the car, you want to complete the transfer of title as soon as possible. That way, you’re off the hook for anything that happens with the car—and the government knows who is responsible.
Before You Transfer a Title
In many cases, people sell or gift a car to a family member because their relative just got a license. It’s important to keep the following points in mind.
- Your relative is required to have a license if they wish to get the car in their name. If they don't have a valid license, or lose it, they need to get a replacement first.
- Your relative will need to complete a transfer of title application at one of your local DMV offices. At that time, they’ll register the vehicle in their name and pay the registration fee. They may also need to pay state and local sales taxes—if the transfer of ownership is a sale and if you live in a state that charges sales tax.
- The DMV will likely ask for proof of automobile insurance before they'll transfer the title to the new owner. Make sure your relative has an insurance policy before going to the DMV. Get fast car insurance here.
- You remain legally liable for the car until the title is transferred, so unless you want to be on the hook for your relative’s driving activities, you should transfer the title as soon as possible.
Selling Your Car to a Family Member
To sell your car to a family member is no different than selling your car to anyone else. That means you need to follow these steps:
- Assign a fair market price to the vehicle. Setting the purchase price too low may be seen as an attempt to avoid paying sales tax.
- Use one of our bill of sale templates for your state. Make sure all information is accurate, including the odometer reading. If you use PrivateAuto to do the deal, a bill of sale will already be included in your in-app transaction process.
- Sign over the car's title. The title process can be slightly different from one state to the next. If more than one owner is listed on the title, most states will require both to sign the original title transfer section, along with the buyer. Depending on your state, you may also need to fill in additional information, such as your mailing address and the vehicle purchase price.
- Deal with license plates. In most states, license plates stay with the buyer, not the car, so unless you live in California or Minnesota, you should take them off before handing over the vehicle.
- Have your family member take the car, bill of sale, and signed title to the DMV so that the official transfer can take place.
- Unless you live in a state that doesn’t charge sales tax, the DMV will require them to pay sales tax on the vehicle. along with a fee to cover the cost of getting new plates and registration. This process is quite straightforward, but it can become more complicated if your vehicle has financing. If your car still has a loan, see this advice on selling a financed vehicle.
Gifting a Car to a Family Member
Gifting a car to a close relative is an easy way to help a loved one while getting the vehicle off your hands. If you want to give your car to a family member for free, your relative will still need to go to the DMV (or equivalent organization) to get the title transferred and purchase new license plates and registration.
Here are the steps to gift a vehicle to a family member.
- Pay off liens (auto loans).
- Consider the giftee’s finances.
- Pay attention to gift taxes.
- Don’t worry about paying sales taxes.
- Use the proper documentation.
- Complete a bill of sale.
- Fill out and sign the title.
- Insure the new owner.
- Complete the transfer with DMV.
Pay Off Financing
If you have a car loan, you’ll need to pay it off before gifting the car. You can only gift the car if the title is lien-free. If you can’t pay off the loan at present, you’ll probably need to wait until you can before making the gift.
Consider the Giftee’s Financial Situation
Can your loved one afford maintenance, insurance, gas, and repairs? If not, maybe they’re not the best fit for gifting your used car. Do you really want to saddle someone with a vehicle if they can’t afford it? This is especially salient for teens who may have unstable incomes. It’s up to you to thoroughly assess the recipient’s financial situation and decide if car ownership is right for them.
Be Aware of Gift Taxes
Gift taxation laws change over time. As of 2023, the IRS allows a $17,000.00 gift tax exclusion per year per person. This means you can gift up to $17K tax-free.
If you gift a vehicle with a fair market value (FMV) of $17K (and you haven’t already claimed any of your annual exclusion), you’ll be in the clear. For vehicles with a FMV over $17,000.00, you as the donor are responsible for paying the gift tax. 2023 gift taxes are 40%.
For example if you gift a car with a $25,000 FMV, you’ll pay gift tax on $8,000 (the amount above the $17K exemption). 40% of $8K is $3,200. That’s a high price to pay to give away a car.
Don’t Worry About Paying Sales Taxes
In a regular sale, the buyer pays the sales tax. However, the gift of a car between individuals is a nontaxable event. So long as the title is transferred without any payment—and so long as the new owner does not take on any financing—the gift is not taxed.
Use the Proper Documentation
Gifting documentation requirements vary by state. In every state, however, the new owner (giftee) will need to prove that the car was a gift. Otherwise, the giftee will be liable for paying sales tax on the FMV of the car.
To prove that the car was gifted, you may have to use specific forms or paperwork. Some states require some form of gift transfer affidavit (often notarized), while others (like Florida) allow you to use a bill of sale with a $0 sales price (see below).
Be sure to research what documentation (affidavit for transfer or other form) your state requires to verify a gifted car.
Gift Bill of Sale for a Car
It’s common sense to complete a bill of sale signed by both parties, even if you are family members. It protects both of you from liability and proves the transfer of ownership.
The bill of sale should include the following information.
- Vehicle identification number (VIN)
- Odometer disclosure statement or odometer reading (current mileage)
- Purchase price ($0, since the car is being gifted)
- Vehicle make and model
Both you and the recipient should sign the bill of sale.
Most states have a state-specific bill of sale, which you should use. If you complete the transfer through PrivateAuto, we include a state-specific bill of sale in our app, which you and the giftee will complete as part of the transaction process. It all happens in the PrivateAuto app and will be stored there for your reference.
Sign Over the Title
Just as in a private-party vehicle sale, both parties (the current owner and the new owner) will need to sign the title and fill out the odometer disclosure. Depending on your state, you may need to complete additional fields in the Certificate of Title, such as mailing address or other info.
Insure the New Owner
The giftee will need to have insurance coverage before they can register the car in their name. If they already have insurance coverage, they need merely to call their insurance agent and add the gifted car to their policy. If they don’t yet have car insurance, they’ll need to get it. All states requires liability insurance at a minimum. Of course, you can opt for full coverage insurance if you want it. Maybe you can help them find the best insurance policy for their age bracket, make, and model. If you don’t have car insurance, get a quick quote here.
Complete the Transfer with DMV
Vehicle transfers are finalized with the DMV, or an equivalent organization, depending on the state. Many states have either Division or Department of Motor Vehicles, while a other states have quite differently-named agencies responsible for licensing and registration of automobiles. For example, Minnesota has Driver and Vehicle Services; Indiana has Bureau of Motor Vehicles; Missouri has Department of Revenue; New Jersey has Motor Vehicle Commission; Oklahoma has Department of Public Safety.
Regardless of its title, we can use “DMV” as shorthand for the appropriate agency in every state.
Your family member will need to go to the DMV to register and title the car in their name. Vehicle registrations can be slightly different from state to state, but here are the most common tasks a new owner will need to complete at the DMV.
- Prove vehicle ownership by showing a completed and signed Certificate of Title, and possibly (depending on the state) a bill of sale.
- Show proof of insurance.
- Show identification (driver’s license or state identification card).
- Register the car in their name and pay the registration fee.
- Prove the car was gifted in order to be exempt from sales tax (each state has its own rules for tax exemptions, so see what gift certification documents your state requires).
- Complete an application for title transfer form (specific to each state) and pay the title transfer fee. The title will need to be signed and have the vehicle identification number (VIN) and odometer reading.
- Unless you live in California or Minnesota, your family member will need to apply for new license plates and pay the license plate fee. While waiting for new plates to arrive in the mail, they will get temporary plates from the DMV that will allow them to legally drive for a short time.
The DMV title and registration process can be daunting, so if the giftee is a teen, consider going with them to help them navigate it all.
With the registration and title process complete, your family member is the proud owner of a new car!
Is it Better to Sell or Gift a Car to a Family Member?
Selling and gifting each have pros and cons. Depending on whether you want to be compensated or not, the value of the vehicle, and other variables, gifting may be the more attractive option…or selling.
Pros and Cons of Selling a Car to a Family Member
- When you sell a car to a family member, you can potentially be compensated for the value of the car. This could be a plus, unless your intention is to do them a favor.
- When you sell a car to a family member, they will be liable for paying sales tax on the vehicle.
Pros and Cons of Gifting a Car to a Family Member
- Gifting is an easy way to do someone a huge favor—and offload a vehicle you no longer need.
- The person doing the gifting may be liable for gift taxes (see the section above for more on this).
Learn More About Title Transfers By State
To understand your state’s title transfer process in detail, click on the link for your state below. We get into the finer points of each state’s title transfer requirements.