Do I Pay Taxes On A Gifted Car In Tn?

Rakibul Hasan

Chief Editor of - Autos Donation

Rakibul Hasan, the CEO and founder of Autosdonation, is an automotive specialist with over a decade of industry experience. With a distinct mastery in car...Read more

Are you considering gifting a car to a friend or family member in Tennessee? While giving a car as a gift can be a generous gesture, it’s important to understand the tax implications that come with it. Many people wonder if they need to pay taxes on a gifted car in Tennessee, and the answer is not quite straightforward.

Tennessee has specific rules and regulations when it comes to gifting a car, and it’s crucial to understand them to avoid any surprise tax bills. In this article, we’ll dive into everything you need to know about gifting a car in Tennessee, including when you may need to pay taxes and how to ensure a smooth transfer of ownership. So, let’s get started!

Do I Pay Taxes on a Gifted Car in TN?

If you’ve received a gifted car in Tennessee, you may be wondering if you have to pay taxes on it. The answer is yes, in most cases, you will have to pay taxes on the vehicle. However, there are certain situations where you may be exempt from paying taxes. In this article, we’ll take a closer look at the rules and regulations surrounding gifted cars in Tennessee.

Understanding Tennessee’s Gift Tax

Tennessee has a gift tax law that applies to any gifts of property, including cars. The tax is calculated based on the fair market value of the vehicle at the time it was gifted. The person who is gifting the car is responsible for paying the gift tax. However, in some cases, the recipient may be responsible for paying the tax if the person gifting the car is not a resident of Tennessee.

If the person gifting the car is a resident of Tennessee, they will need to file a Tennessee Gift Tax Return and pay the tax owed. The tax rate varies depending on the value of the vehicle and ranges from 5.5% to 9.5%. However, if the fair market value of the vehicle is less than $13,000, the gift tax is waived.

Exceptions to the Gift Tax

There are some exceptions to the gift tax in Tennessee. If the vehicle is gifted between spouses, there is no gift tax. Additionally, if the vehicle is gifted to a non-profit organization, there is no gift tax. If the vehicle is gifted to a family member, there may be a reduced gift tax rate.

Transferring Vehicle Ownership

When a vehicle is gifted, the ownership will need to be transferred to the recipient. The process for transferring ownership varies depending on whether the vehicle is titled in Tennessee or in another state.

If the vehicle is titled in Tennessee, the recipient will need to bring the following documents to the County Clerk’s office:

• Current title or bill of sale
• Proof of identification
• Proof of insurance
• Application for title and registration
• Tennessee gift tax return, if applicable

If the vehicle is titled in another state, the recipient will need to contact the Department of Revenue to determine the proper procedure for transferring ownership.

Benefits of Gifting a Car

There are several benefits to gifting a car in Tennessee. For the person gifting the car, it can be a way to reduce the size of their estate and potentially avoid estate taxes. For the recipient, it can be a way to save money on purchasing a car and avoid paying sales tax. Additionally, gifting a car can be a way to help out a family member or friend who may be in need of transportation.

Gifted Car vs. Inherited Car

It’s important to note that there is a difference between a gifted car and an inherited car. Inherited cars are not subject to gift tax in Tennessee. Instead, the value of the vehicle is included in the decedent’s estate for estate tax purposes. If the estate is valued at less than $11.7 million, there is no estate tax owed.

When it comes to transferring ownership of an inherited car, the process is similar to transferring ownership of a gifted car. However, the recipient will need to provide additional documentation, including a copy of the death certificate and proof that they are the rightful heir.

Conclusion

In Tennessee, gift tax applies to any gifts of property, including cars. If you’ve received a gifted car, you will likely need to pay gift tax unless you fall under one of the exceptions. It’s important to follow the proper procedures for transferring ownership and to file any necessary paperwork with the County Clerk’s office or Department of Revenue. Gifting a car can be a great way to help out a loved one, but it’s important to understand the tax implications before making the gift.

Frequently Asked Questions

When receiving a car as a gift in Tennessee, you may wonder about the tax implications. Here are some common questions and answers to help you understand the process.

Do I need to pay taxes on a gifted car in Tennessee?

Yes, you do. The Tennessee Department of Revenue considers a gift of a car to be a taxable transaction, which means that you will need to pay a gift tax. The amount of tax you will need to pay depends on the value of the vehicle. You will need to complete a Gift Affidavit and pay the gift tax within 45 days of receiving the vehicle. Failure to pay the tax could result in penalties and interest.

It is important to note that if the person gifting you the car has already paid the gift tax, you will not need to pay it again. You will need to provide proof of payment when registering the vehicle in your name.

How is the value of the gifted car determined?

The value of the gifted car is determined by the fair market value of the vehicle at the time of the gift. This value can be determined by consulting a trusted source, such as the Kelley Blue Book or other reputable sources. It is important to ensure that the value you report is accurate, as understating the value could result in penalties.

If the car is being gifted to you by a family member, you may be able to use the fair market value at the time of the gift as the tax value, even if the actual value of the car is higher. This is because Tennessee allows for a family gift tax exemption, which exempts gifts between certain family members from gift tax.

What other documents do I need to provide when registering the gifted car?

In addition to the Gift Affidavit and proof of gift tax payment, you will also need to provide the following documents when registering the gifted car in your name:

• The vehicle title, signed over to you by the person gifting you the car
• Proof of insurance
• A completed application for Tennessee title and registration
• A valid form of identification

You may also need to provide additional documentation depending on your specific situation, such as a lien release if the car has a lien on it.

Can I get an exemption from paying gift tax on a car if I am on a low income?

No, there are no exemptions or waivers for gift tax in Tennessee based on income. If you receive a car as a gift, you will need to pay the appropriate gift tax, regardless of your income level. However, if the car is being gifted to you by certain family members, you may be eligible for the family gift tax exemption, which could reduce or eliminate the amount of tax you need to pay.

If you are concerned about the cost of paying gift tax on a car, you may want to consult with a tax professional or financial advisor to see if there are any strategies you can use to minimize the impact of the tax.

What happens if I don’t pay the gift tax on a gifted car in Tennessee?

If you do not pay the gift tax within 45 days of receiving the gifted car, you may be subject to penalties and interest. The amount of the penalty will depend on the value of the vehicle and the length of time you have been delinquent in paying the tax. In some cases, the state may also place a lien on the vehicle or take other legal action to collect the tax owed.

It is important to make sure that you pay the gift tax on time to avoid any penalties or legal issues. If you are unsure about how much tax you owe or how to pay it, you may want to consult with a tax professional or contact the Tennessee Department of Revenue for assistance.

How To Gift A Vehicle To Someone Without Paying Taxes

In conclusion, if you received a gifted car in Tennessee, you may be wondering if you need to pay taxes on it. The answer is yes, you do. The state of Tennessee requires you to pay a gift tax on any vehicle that is gifted to you, even if it is from a family member or friend.

However, the amount of tax you need to pay depends on the value of the vehicle. If the car is worth less than $4,000, you will not need to pay any tax. If it is worth more than $4,000, you will need to pay a percentage of the vehicle’s value as tax.

It is important to note that failing to pay the required taxes on a gifted car can result in penalties and fines. So, make sure to follow the necessary steps to ensure that you are in compliance with the state’s tax laws. By doing so, you can enjoy your gifted car without any worries or legal issues.

Rakibul HasanChief Editor of - Autos Donation

Rakibul Hasan, the CEO and founder of Autosdonation, is an automotive specialist with over a decade of industry experience. With a distinct mastery in car donations, sponsorships, and gifting, Rakibul combines his passion for automobiles and generosity to revolutionize the car donation landscape. He established Autosdonation to facilitate the car donation and gifting process, making it more accessible and enjoyable for all involved.

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