You can sell your car to your daughter for $1, although doing so probably isn't necessary. States tax vehicle transfers differently. Your daughter may have to pay tax on the vehicle's market value if you document the transfer as a sale rather than a gift. Know your state's rules before you complete any title transfer paperwork with your daughter.
To determine the cheapest way to transfer ownership to your daughter, call your state motor vehicle department or check its website for information. You don't have to give your name or driver information to obtain advice for your title transfer. You might find that your daughter has to pay tax regardless of whether the car transfer is a gift or sale. States also charge different types of tax, such as use tax, sales tax or county tax, and you may not be able to waive all fees if you gift the vehicle.
Use tax is different from sales tax. If your state waives sales tax and charges use tax, your daughter is going to have pay a tax on the market value of the vehicle. If so, your state uses the car's identification number and mileage to determine the car's retail value. The use tax isn't usually as high as sales tax and many states cap the cost. For example, your daughter might have to pay three percent of the car's market value for use tax or $200, whichever is greater.
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Some states charge tax on only the vehicle's sales price, so selling the car for $1 will limit the sales tax charge. If your state charges sales tax, be sure to find out from your motor vehicle department the amount of all tax charges in your area. Your state might charge six percent, while your county charges an additional two percent. If you gift the vehicle, your state might allow your daughter to submit proof that you originally paid tax for the car's original purchase and waive some or all of the tax charges.
If you and your daughter don't immediately need to transfer ownership, add her to the vehicle's title instead. Because you'll remain on the title, she won't pay any taxes at all. Having both names on the title allows your daughter to register the vehicle and insure the car in her name alone. You'll still have to pay a title application fee to add your daughter to the title. You can later sign the title to release your ownership, allowing your daughter to obtain the title in her name only. You also can remain on the title with her and sign the title if she ever sells the vehicle.