Do You Pay Taxes On A Gifted Car In Illinois?

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 thinking of giving or receiving a car as a gift in Illinois? If so, you may be wondering if you need to pay taxes on it. The answer is not a simple one, as it depends on several factors. In this article, we will explore the rules and regulations regarding gifted cars in Illinois and help you understand if you are liable for any taxes.

Illinois has strict laws when it comes to vehicle transfers, and gifting a car is no exception. While it may seem like a generous gesture, it is essential to understand the legal requirements to avoid any unexpected surprises. So, let’s dive into the details and find out if you need to pay taxes on a gifted car in Illinois.

Do You Pay Taxes on a Gifted Car in Illinois?

Giving and receiving gifts is a wonderful gesture, especially when it comes to big-ticket items like cars. However, when it comes to taxes, things can get a little complicated. If you’re wondering whether you have to pay taxes on a gifted car in Illinois, the answer is, it depends. Here’s what you need to know.

Gift Tax in Illinois

In Illinois, there is no state gift tax. However, if you are giving a car as a gift, you may be subject to federal gift tax laws. According to the IRS, any gift worth more than $15,000 is subject to gift tax. If you are giving a car to a family member or friend, you may be able to avoid gift tax by using the annual gift tax exclusion.

The annual gift tax exclusion allows you to give up to $15,000 per person per year without incurring gift tax. So, if you are giving a car worth $25,000 to your son, you could give him $15,000 in cash and gift him the car without paying gift tax. However, if you give him $25,000 in cash and the car, you will be subject to gift tax on the $10,000 over the annual exclusion.

Illinois Sales Tax on Gifted Cars

While there is no state gift tax in Illinois, you may still be subject to sales tax on a gifted car. According to the Illinois Department of Revenue, if you receive a car as a gift, you are responsible for paying the sales tax on the fair market value of the vehicle.

The fair market value is the price that the vehicle would sell for in an arm’s length transaction between a willing buyer and a willing seller. If the car is new, the fair market value is usually the manufacturer’s suggested retail price. If the car is used, the fair market value may be lower than the retail price, depending on the condition of the vehicle.

Transferring Title and Registration

When you receive a gifted car, you will need to transfer the title and registration into your name. This process involves filling out paperwork and paying fees to the Illinois Secretary of State. Depending on your situation, you may also need to provide additional documentation, such as proof of insurance.

Benefits of Gifting a Car

Despite the potential tax implications, gifting a car can still be a great way to help out a family member, friend, or charity. By gifting a car, you can avoid the hassle of trying to sell it yourself, and the recipient can save money on the purchase of a new vehicle.

In addition, if you are giving a car to a charity, you may be able to claim a tax deduction for the fair market value of the vehicle. This can be a great way to support a cause you care about while also benefiting from a tax break.

Gifting a Car vs. Selling a Car

If you are trying to decide whether to gift a car or sell it, there are a few things to consider. Gifting a car can be a great way to help out a family member or friend, but it may not be the best option if you need the money from the sale of the car.

Selling a car can also be a good option if you want to avoid the potential tax implications of gifting a car. However, selling a car can be time-consuming and may require you to negotiate with potential buyers.

Ultimately, the decision to gift or sell a car depends on your individual situation and preferences. If you do decide to gift a car, be sure to follow the proper procedures to avoid any tax or legal issues down the road.

Conclusion

In summary, while there is no state gift tax in Illinois, you may still be subject to federal gift tax laws and sales tax on a gifted car. Be sure to follow the proper procedures for transferring title and registration, and consider the potential tax implications before gifting a car.

Whether you decide to gift or sell a car, remember that it’s a big decision that requires careful consideration. By taking the time to weigh your options and do your research, you can make the best choice for your individual situation.

Frequently Asked Questions

Do you pay taxes on a gifted car in Illinois?

Yes, you may have to pay taxes on a gifted car in Illinois. The Illinois Secretary of State’s office states that if you receive a car as a gift, you must pay tax on its fair market value. The tax amount is calculated based on the fair market value of the car and the current tax rate in your county.

However, there are some exceptions to this rule. For example, if the donor is your spouse, parent, or child, you may be exempt from paying taxes on the gifted car. Additionally, if the car was gifted to you as part of an inheritance, you may not have to pay taxes on it.

What is the tax rate for a gifted car in Illinois?

The tax rate for a gifted car in Illinois is based on the fair market value of the vehicle and the current tax rate in your county. The Illinois Secretary of State’s office provides a tax rate chart that you can use to determine the tax amount you will owe.

It’s important to note that the tax rate for a gifted car may be different than the tax rate for a purchased car. The tax rate for a gifted car is typically lower than the tax rate for a purchased car, as the tax is calculated based on the fair market value of the car rather than the purchase price.

How do I calculate the fair market value of a gifted car in Illinois?

To calculate the fair market value of a gifted car in Illinois, you can use resources such as Kelley Blue Book or NADA Guides. These resources provide an estimated value of the car based on its make, model, year, and condition.

It’s important to note that the fair market value of the car may be higher or lower than the actual value of the car, depending on various factors such as the car’s condition, mileage, and location.

Do I have to pay taxes on a car gifted to me by a family member?

In Illinois, you may be exempt from paying taxes on a car gifted to you by a family member if the donor is your spouse, parent, or child. This exemption applies as long as the car is a gift and not part of an inheritance.

It’s important to keep in mind that if the donor is not a family member or if the car was gifted to you as part of an inheritance, you may have to pay taxes on the fair market value of the vehicle.

Do I need to report a gifted car on my tax return in Illinois?

In Illinois, you do not need to report a gifted car on your tax return. However, you will need to provide proof of the gift and pay any required taxes on the fair market value of the vehicle.

If you are unsure whether you need to pay taxes on a gifted car or how to calculate the tax amount, it’s recommended that you contact the Illinois Secretary of State’s office or consult with a tax professional.

Gift a vehicle without paying sales tax – Gift Tax $10 – Form 14-317 – Save Tax Money

In conclusion, the answer to the question “Do you pay taxes on a gifted car in Illinois?” is yes, you do. Even though the car was not purchased, it is still considered a taxable gift by the state. However, the amount of tax you will have to pay depends on the fair market value of the car.

It is important to note that the taxes on gifted cars can be quite high and may vary depending on the value of the vehicle. So, before accepting a gifted car, it is essential to consider the financial implications of the tax that will be imposed on it.

In any case, it is always a good idea to consult with a tax professional or the Illinois Department of Revenue to determine the exact amount of tax you will have to pay on a gifted car. By doing so, you can avoid any surprises and ensure that you are fulfilling your tax obligations in the state of Illinois.

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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