The car's recipient may still have to pay taxes based on the gifted vehicle's market value. If you give a car to a family member, however, they may avoid these taxes.
Are you unsure how to go about gifting a car in Texas? Fear not—
Jerry
, thecar insurance
super app, has compiled everything you need to know in this guide. Read on to learn about gifting a car, any associated fees, and how to transfer a car title in Texas.RECOMMENDEDCompare auto insurance policies
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Find insurance savings (100% Free)How to buy a car as a gift in Texas
If you're purchasing a car with the intention to gift it, you must first buy the car as if you're buying it for yourself. You may do this through a dealership or a private seller. Consider taking the car's future recipient with you so they can weigh in on which car you buy.
After purchasing the car, you must
transfer the car title
to the gift recipient. If you pay for the car in full up front, thetitle
is yours to transfer.If you are financing the car, however, you may not be able to transfer its title while a
lien
is still on the vehicle. In this case, contact the lienholder to ask about your options.Key Takeaway To give a car as a gift, you must transfer the car title. This may not be possible if there is a lien on the car.
MORE:
How to buy a new car
How to gift a used car in Texas
The easiest way to gift a car is to give away a vehicle you already own. You may have finished paying off the
loan
on this car or purchased the car in full upfront.The recipient of the gifted car may be liable to pay taxes on the vehicle based on its current market value. If the recipient is your relative, however, they may qualify to pay Texas' $10 gift tax instead.
Family members who qualify to pay the Texas gift tax instead of a property value-based tax assessment include:
Spouses
Parents
Stepparents
Siblings
Grandparents
Grandchildren
Children
Stepchildren
Legal guardians
Negotiate the terms of the gift with your recipient
In Texas, it is not completely free to gift a car. Even an immediate relative receiving a gifted car may have to pay taxes on the vehicle's current market value once they register the car in Texas.
Car-giving in Texas entails fees for the title application and vehicle insurance verification as well—plus a $1 automation fee. You must discuss these taxes and fees with the person to whom you're giving the car. It’s a good idea to reach an understanding about who is liable for which expenses.
Keep in mind that car-related expenses don't stop once the
title transfer
is complete. Maintenance, insurance, gas, and parking can also add up over time.On top of that, most Texas counties require registered vehicles to pass a vehicle
emissions test
, or smog test. Your car's recipient will eventually have to pay a fee to have the car smogged.Make sure you and the car's recipient both understand who's responsible for these costs. The following table gives an idea of how expenses may add up:
Cost
Texas average
Title application
$28 or $33
Vehicle inspection fee
up to $30.75
Local and county fees
up to $31.50
Vehicle insurance verification fee
up to $31.50
Registration fee
$51.75
Insurance
$1,869 (liability only) $2,308 (full coverage) per year
Record of the gift with a bill of sale
Even when you're gifting a car, you need to draft
a bill of sale
to create a paper trail for the DMV. This document should detail the terms of the gift, identifying both you and the recipient. A gift of sale absolves you from financial responsibility for the car once you've given it to someone else.Use this document to notify the Texas DMV that ownership has transferred on the gifted vehicle. The bill of sale should include the following information:
Current
odometer reading
Date of transfer
Gift value
Sales tax
Personal information for giver and recipient
Signatures of giver and recipient
Transfer the vehicle title
The car title transfer in Texas is the most important step to gifting a car. The title transfer process for gifting a car is similar to the title transfer process for selling a car.
Visit your local Texas county tax office to start the car title transfer. You should bring the following documents:
A completed Texas vehicle title application (
form 130-U
)If applicable, a release of lien or power of attorney
Required Texas fees and taxes
Keep in mind that the car's "buyer" (or in this case, the gift recipient) is responsible for taking care of the title transfer. As the vehicle "seller," you are only required to provide the following:
The current car title signed over to the new owner (simply write "0" in the price section if it's a gift)
A current odometer reading on the vehicle title certificate
A signed Application for Texas Certificate of Title
A lien release, if applicable
Purchase Texas liability insurance—or full coverage
The minimum
required car insurance in Texas
is body injury liability coverage ($30,000 per person/$60,000 per accident) and property damage liability coverage ($25,000 per accident). These types of coverage make upliability car insurance
.Drivers who do not meet these insurance minimums can face serious fines, so make sure the recipient of the gifted car is prepared to purchase auto insurance.
MORE:
Car loan in Texas 2022
How to find affordable car insurance in Texas
Gifting a car might be a complex process, but insuring a car doesn't have to be. Downloading the
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Find insurance savings (100% Free)FAQs
How do I transfer a car title in Texas as a gift?
+
When you gift a car, the title transfer works the same as it would for selling the car. You must visit your local Texas county tax office with a completed Texas vehicle title application, a release of lien or power of attorney, and payment for required fees. You must also sign over the car title to the new owner.
How much is gift tax on a car in Texas?
+
If you give a car to an immediate relative, they may qualify to pay a $10 Texas gift tax. Otherwise, they might be liable to pay tax based on the car's current market value.
TexasCar TitleTitle TransfersDMVState Laws
Brenna Swanston is an insurance writer as well as an editor, and journalist based in San Luis Obispo, California. Her byline is featured on USA Today, LIVESTRONG.com, Chron.com, Sciencing, and Career Trend. Brenna's journalism work has earned national and statewide awards, most recently from the Association of Alternative Newsmedia. When she's not clacking away at her keyboard, you can catch Brenna at her yoga studio, on a hike somewhere, or snuggled up at home with her kitten. Her first car was a red 1999 Jeep Grand Cherokee named Humphrey.