When you give a gift of a certain value, you may have to pay gift taxes. The federal government imposes taxes on most gifts that exceed a set maximum value. Some states charge gift taxes as well. However, at the time of publication, there is no state gift tax in Pennsylvania.
Pennsylvania State Taxes
In Pennsylvania, you can give a gift of any value without paying state taxes. The state will not impose taxes on the gift's recipient either. Under Pennsylvania law, a gift is any good or service you provide without receiving compensation. However, cash or property that you transfer in exchange for something of value is subject to state taxes.
If you receive a vehicle as a gift, Pennsylvania will not charge any state taxes to you or to the donor. However, you and the donor must fill out an "Affidavit of Gift" form and attach it to the title application with Form MV-1, Form MV-4ST or an Applicant Summary Statement in order to avoid paying sales and use taxes on the transaction. If the gifted vehicle has an out-of-state title, the donor must show that he paid sales tax on the vehicle in another state.
Federal Gift Tax
Though gifts in Pennsylvania are exempt from state taxes, you will still have to pay federal taxes for gifts over a certain amount. The federal gift tax only applies to the donor of the gift. At the time of publication, donors will only pay gift taxes on gifts valued over $13,000. The federal gift tax does not apply to exchanges between married couples.
When an individual gifts property after his death, Pennsylvania imposes an inheritance tax. This tax applies regardless of the estate's size. At the time of publication, property gifted to children, grandchildren, stepchildren and parents will incur an inheritance tax of 4.5 percent, and property gifted to siblings will incur a 12 percent inheritance tax. All other beneficiaries will pay a 15 percent inheritance tax.