As long as you're fine with not receiving any proceeds from the transaction, gifting a car to a family member in Texas can offer you considerable savings on the taxes that result from a vehicle sale. Rather than calculating sales tax based on the car's value, the state just charges a small flat tax for gifts to parents, children, spouses and other qualifying relatives. You'll still need to complete a formal process to transfer the car to your daughter, have her register the car and get a title in her name. Your daughter also will have to pay other fees such as those related to the title application, county charges and car registration.
Understanding Texas Taxation on Vehicles
Normally, those registering a new or used car in Texas will need to pay sales and use tax based on the net sale price of the car. This amount depends on the type of sale and the registrant's residency.
For example, if a Texas resident buys a new car from a local dealership, then they'll pay 6.25 percent in state sales and use taxes plus any local taxes due, although vehicle taxes you might have paid in another state can help reduce the amount due. On the other hand, someone who has bought a used car from a private individual will need to pay taxes based on what's called the standard presumptive value. This takes into account the usual value of the car in the state and can sometimes lead to higher taxes, especially if the car was sold under its market value.
However, the state has alternative fees for cases where the owner has received the car as a gift or an even exchange. When gifting a car to a family member in Texas, you only have to worry about the family member paying a $10 gift fee.
Preparing to Gift the Car
You'll need to take some formal steps to legally gift the car to your daughter and produce the documentation needed. These include the following:
- Check for eligibility: Before you try to hand the car over to your daughter, check that it has no liens against it. For example, you can't gift the car if a debt collector is using that car for collateral. You'll also want to check that the title is clean.
- Gather important details: When you or your daughter proceed with the paperwork, you'll need to have key details like the vehicle's identification number, make, mileage, weight, year and model. So, you'll want to jot down this information or do research before you proceed.
- Make a bill of sale: Even though you aren't technically selling the car to your daughter, you need to still draft a document that shows the gift and any conditions attached. This bill of sale should include the gift value, specifications for the car, contact information for you and your daughter, the date and both your signatures.
- Locate the original title: You'll need the original title for the title transfer process. So if you can't find it, you'll need to obtain a copy from the Texas DMV. You can do this in person or through the mail, and you'll fill out an application, pay a fee of $2 by mail or $5.45 in person and show identification and proof of ownership.
Form 14-317 and Vehicle Transfer
Before your daughter goes to pay the gift fee and register the car, you'll fill out Form 14-317, Affidavit of Motor Vehicle Gift Transfer together. This asks for basic vehicle information, the relationship you have with the gift recipient, contact information for both of you and both your signatures witnessed by a notary. Your daughter will take this form, her identification and the $10 gift tax to her county's tax assessor's office.
She can then complete the vehicle registration process at a Texas DMV location. She'll need the original title, proof of insurance, personal identification, the bill of sale and possibly an inspection report. She'll have to pay registration and title fees alongside any county-specific fees. For example, a typical car registration fee runs $50.75, most local fees range from $10 to $21.50 and title fees range from $28 to $33.
The registration process needs to happen within 30 days of the gift transfer. Otherwise, your daughter may have to pay penalty fees.
- Texas DMV: Affidavit of Motor Vehicle Gift Transfer
- Texas DMV: Motor Vehicle – Sales and Use Tax
- Car and Driver: Texas Car Sales Tax: Everything You Need to Know
- Your Mechanic: How to Gift a Car
- Texas DMV: Get a Copy of Your Vehicle Title
- Texas DMV: Buying or Selling a Vehicle
- Texas DMV: Texas Registration Fees
- Tarrant County, Texas: Title Fees and Taxes