The decision of whether or not to consider cars exempt from taxes varies among states and even at the federal level; some states excuse gifted vehicles from taxes in certain circumstances, such as the exchange of cars between family, while the Internal Revenue Service declares only cars gifted to charitable donations tax-exempt. In many states, the definition of a gifted car varies, and in turn determines its tax status. After determining tax status, recipients and givers of gift cars must carefully complete requisite paperwork, ensuring compliance with state and federal laws.Continue Reading
Regardless of whether people give cars as gifts to family members or organizations, they must follow certain legal proceedings. Usually, the process of gifting involves transferring ownership title. In some states, exchanging a car title simply involves listing the recipient's name on the bill of sale. Some states also require completion of secondary forms, such as gift forms.
Tax exemptions vary among states; some states, like Arizona, do not grant tax exemptions for any gifts, including cars. States offering gift car tax exemptions permit exemption only with receipt of tax deduction paperwork. Many states, including Michigan, provide stringent requirements for qualifying gift car recipients. Michigan's state law clearly lists vehicular tax exemptions by outlining who qualifies as "family." After submitting paperwork, applicants should prepare to provide requisite paperwork for state and federal authorities.Learn more about Taxes