When selling a car to someone, the process usually is fairly straightforward. You and the buyer determine a price, then transfer the title to the buyer's name. But if you decided to donate or gift the car for free to a family member, you might have to complete a few extra steps. Before you take any action to transfer ownership, call your state's department of motor vehicles (DMV) office for the exact rules and process.
Bill of Sale
When you sell a car, you must create and sign an official bill of sale with the buyer. It lists a full description of the car and the transaction, including the selling price. But if you plan to donate the car, you do not list a selling price on the bill of sale. You merely note that you're transferring ownership to the family member for zero dollars as a gift or donation.
Signing the Title
If you look at the back of your car's title, you'll probably see a space for the selling price of the car. When you sign the back of the title to transfer ownership to your family member, write the word "gift" or something similar instead of the sales price. You also can leave the space blank. You also may have to fill out a gift form at your DMV office.
Sales Tax Issues
Even though you did not sell the car, your family member may still have to pay a sales tax fee to the department of motor vehicles based on the value of the car. If this is the case in your state, the DMV office typically requests the Kelley Blue Book value for a car in that condition and multiplies that value by the tax rate. Before you proceed with this transaction, check your state laws regarding car transfers.
Working with a Charity
If the family member to whom you plan to donate the car has a legitimate financial need as defined by local charities, you could donate the car to him through the charity. Contact the charity to find out the requirements for a person in need (such as income level) and state you want to donate it to your family member. When you donate the vehicle through an official charity, you usually can take a tax deduction for a charitable donation, whereas signing it over to the family member directly does not constitute a deductible donation.