How to Give a Car as a Gift

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A Gift of Four-wheeled Freedom
There are times when you have a car that you'd like to give to someone as a gift. Perhaps you have a son or daughter who have just graduated high school and need a set of wheels to get around in. Maybe a friend is down on their luck and needs transportation. Perhaps you have an older car that's been sitting around for a while that won't fetch much money as a trade-in and you'd like to donate it to a charity. Donating a car can even get you a credit to use on your taxes.
In any event, if you are thinking of gifting or donating a car, there are a few things you should know. Let's take a look.

Gifting a Car

To give someone a car you'll first need to have a clear title to the vehicle. That means you'll need to pay off any loan on that car. If you already have the title to the vehicle in question, you are good to go. But if a financial institution is still involved and you are making payments, contact them and pay off the loan so you will be mailed the title.
When you have the title in hand, you can transfer it to the person you are gifting. They will need the title to prove to the Department of Motor Vehicles (DMV) that the vehicle belongs to them when they register it under their name. You'll also want to provide a Bill of Sale.

Donating a Car

If you have a vehicle you'd like to donate to a charitable organization, there are many charities that would love to take your car. A simple Google search will reveal that such charities as:

  • Red Cross
  • Vehicles for Veterans
  • Wheels for Wishes
  • Kars 4 Kids
  • Habitat for Humanity

Many others are looking for your donation of a vehicle. When donating a car to a nonprofit organization, use a reputable charity that will make the most of your donation and minimize your risk of an IRS audit. Find a charity that handles the transaction to ensure that all the profits remain at the charity. It is possible that a charity you already support has a vehicle donation program. Make sure the charity is a 501 c 3 non-profit organization, so you get a tax credit for your donation. Some don't even require the car to be in running condition. 

Remember to sign over the vehicle to the charity in question. 
You don't want to still be responsible for the car once it leaves your driveway. Also use the Fair Market Value (FMV) of the car not the highest value listed by Kelley Blue Book. Otherwise, you can only deduct the amount the charity sells the car for at auction as indicated on the written receipt that the charity will send to you.
Finally, it is important to know that non-cash donations are the most common triggers for IRS audits. Keep all documentation of a car donation. If the car is valued at over $250, you'll need to obtain and retain a written acknowledgment from the charity. If the car is worth more than $500, you will need to complete Section A of IRS form 8283 and attach it to your annual taxes. If the car is worth more than $5,000, you'll need to have it appraised by an independent party and fill out Section B of IRS Form 8283.

Let Lithia Help!
Giving a car to someone or donating it to a charity can be a fairly simple matter and you'll be making a positive difference in someone's life. Because you may be required by the DMV to provide an estimate of the car's worth, Lithia Motors can help. You can calculate the vehicle's value by using our "Value Your Trade" tool.