<p>If A gives his good friend, B, a car, and expects nothing in return, is there any tax consequence for either A or B?</p>
<p>Not sure on all the details, but short answer: yes. Sell it to him. My parents bought a car from my grandma several years ago for $1.</p>
<p>The old car’s FMV is less than $3,000.</p>
<p>I this case, the IRS will not be interested (gift tax is triggered at a much higher gift value), but you migh have some splainin’ to do at the DMV when you transfer the title.</p>
<p>I did some search and it looks like there would be no tax for A because the value is not high enough. What about B? Would that be considered “income” to B?</p>
<p>No. Unless it was received in exchange for services performed. Gifts are not taxable to the recipient. Ever.</p>
<p>No, gifts are not considered income. Even if they come from a friend. The donor (gift-giver) pays the gift tax, but only on amounts over $13,000. The limit is annual, per person. So your dad could give you $13,000 each year with no tax consequences, or he could give you and your spouse $26,000 or your dad could give you $13,000 and your mom give your $13, 000 for a total of $26,000 or they could each give both you and your spouse $13,000 for a total of $52,000 each year without tax consequences for anyone</p>
<p>In Connecticut, I believe the new owner would have to pay sales tax on the fair market value (or 6% of $3000) at the time of registering the car at DMV.</p>
<p>Went through this scenario recently as mother-in-law gave son her used car. Had the car been newer - we would have had to pay some type of sales tax - but in our state there was an exclusion for a car that was older than 7 years - so we did not have to pay anything. I suggest checking with the MVA in your particular state.</p>
<p>I agree with all prior posters: No income or gift tax (as long as the auto wasn’t payment for work), but DMV may try to collect sales tax on FMV if the transaction value is ambiguous. Make a bill of sale with some value the young man can defend if questioned at the DMV. (My favorite explanation for a low sales price is “It needs a new transmission.”)</p>
<p>In Texas, there is a $10 gift tax when transfering car title gift family member… not sure if that includes friend.</p>
<p>Thanks for all the replies. Really appreciate that. The location is D.C.</p>
<p>I personally think a gift is not a sale and it makes no sense for them to collect sale tax.</p>
<p>^ “Good sense” and institutional policy are sometimes mutually exclusive. The old childhood adage “look before you leap” may save you some problems downstream. Good luck with the new (used) car.</p>
<p>You do need to check the laws of wherever the car will be. In CA, where we delivered the car, if it was other than parents to kid, there would be some taxes assessed when the vehicle was registered, but NOT for parents to kid. Federal gift taxes don’t apply, as noted above, when the value is under the limit (it appears now it’s $13K). There were no tax consequences for S when he got the car we shipped him to CA. They would have collected a sales tax on FMV of car if it was other than parents to kid in CA, if memory serves.</p>
<p>^ There’s actually some reasoning behind taxing on FMV if the gift is made outside the family. It’s to stop faux gifting such as “I’ll gift you $12,000 in cash, and you gift me that Camaro. No taxable income for you, no sales tax payment for me.”</p>
<p>Just found more info. Looks like there will be excise tax. So your advice of making a bill of sale with some reasonably low number will be used.</p>
<p>Blue book value is generally viewed as a good guide, if the car is of a recent enough model to be listed. You may wish to inquire about if there are exceptions when the transfer is between family members, as there is in other states including CA.</p>