Thursday, September 22, 2011

How do you avoid taxes on gifts such as a car?

I used to live with my dad in Pennsylvania. During that time, I drove 'my' car but it was titled in his name. Since then, I moved to Florida (he still lives in PA) and brought my car with me. He now wants to change the title to my name. Is there a way to do this so neither one of us gets taxed out the wazoo? Is it better he %26quot;sell%26quot; me the car for $5.00 or present it as a gift? Is there a difference between PA tax law and FL tax law in this matter or is all federal?How do you avoid taxes on gifts such as a car?
Just change the title over to your name. PA doesn't tax gifts unless they are given for past or future services, and FL doesn't have a state income tax, so you're OK there. For federal, if the value of the car at the time of transfer is under $12,000 then there is no need for either of you to even file anything on it. If it's value is over that, then your dad will probably have to file a gift tax return for the amount over $12K but is very unlikely to owe any tax on the gift.



You won't report it on your tax return.How do you avoid taxes on gifts such as a car?
For the vast majority of people gift tax is a non-issue. Unless your father is a multi-millionaire and you are an only child don't worry about it.How do you avoid taxes on gifts such as a car?
There are 2 issues. Federal gift tax if the FMV is more than $12,000. That's form 709 and your dad would fill it out.



Transfer tax at the state level. My state noticed the %26quot;gifts%26quot; and changed their statute to read FMV. Eg, if the car is worth $12,000, they want the tax based on $12K when you register the car in their state.



(It looks like Florida only charges $100.)How do you avoid taxes on gifts such as a car?
Get the transfer form from your dmv. It specifies if transfer between family. There may be a transfer fee but that might be all.