giving my old car

to a woman who needs it. The car is old. It occurred to me there may be a tax on it somehow, due from me or from her. Is there, if I just sign it over to her? Who owes the tax, and how/when is it paid?

thanks.

MR 

Go to tthe AZ DMV website to determine what you need to do.

I would pay the fees because that way you know everything was done properly.  If you rely on someone else to do something like this, it likely will come back to bite you in the rear end.  If she does not pay, guess who gets dinged by the DMV.  Also, if she has an accident, guess who gets dinged.  You want to do this one in a way that relieves you of ALL liability associated with the vehicle.

There should not be any federal taxes associated with this one for either you or her.  However, because she is not a relative, you may have to state the value of the car at the time of transfer.  In my state, a portion of the annual registration fee is a property tax on the vehicle.  It would not surprise me if that were not also true in AZ.  When I transferred a vehicle to my son, I did not have to pay the registration fee that was a property tax.  But, my recollection of the CA paperwork was that someone would have had to pay that one, if the transfer had been to someone who was not a relative, even if no money changed hands.

Here's the process in AZ.

There is no tax on the private sale of vehicles.

For your own protection I strongly recommend the following:

1 - A bill of sale (even for $1.00), with the date and time of the sale, that says you are selling the car AZ IS with no warranties or guarantees of any kind. Signed by both parties, in duplicate, and you keep one.

2 - On the back of the title, you MUST (by law) enter the current odometer reading, check the odometer boxes, AND put in the name and address of the buyer, AND have your signature notarized. Photocopy both sides of the title. Do not let the title remain "open" (without the buyer information).

3 - When you hand over the title and the keys, you MUST (by law) remove your license plate(s) from the car BEFORE the new owner drives off with it. This should not be a problem for the new owner as a temporary sticker is available online or at any DMV office. She can get it with the VIN of the car. You do not want anybody driving around with a license plate that has your name on the record. Once she gets it home she'll have no choice but to go to the DMV and transfer the title and get new plates. DO NOT ACCEPT ANY SOB STORY THAT RESULTS IN HER DRIVING OFF WITH YOUR LICENSE PLATE.

4 - On the back of the registration form there is a notice to the DMV about the sale of the vehicle. You MUST (by law) fill it out and send it it. Make a photo copy of both sides before you mail it.

5 - Keep the documentation on file indefinitely. You never know when things can come back to haunt you.

Thanks.

Never thought of a bill of sale. Now I'm off to look for one. Are there forms posted on this site?

MR

You don't need a legal form for a bill of sale.  You can make a word document that says "BILL OF SALE" just make sure it includes ALL of the relevant information: description of the vehicle: make/model/year/odometer reading; your name, her name, date, vehicle is sold AS IS with no implied warranty by seller.  A line for your signature and hers.  Cost:  $1. 

BILL OF SALE

1996 Ford Escort Red Four Door Sedan 96,435 miles By Sheila Farquart (Owner)

for the price of $1 AS IS with no implied warranty or guarantees to

Freida Tuttle (Buyer) on September 28, 2009.  Transfer of title from owner to buyer immediately.  Buyer to

provide own registration, plates, and insurance upon transfer of ownership. 

______________________... ______________________...

Sheila Farquart(0wner) signature  &... Freida Tuttle (buyer) signature

Personally I would get that notarized too but that is just me.  Some might consider that overkill.

ClydesMom:

Personally I would get that notarized too but that is just me. Some might consider that overkill.

Quite often (in AZ) the buyer and seller go to the seller's bank to get the seller's signature on the title notarized.

If you have the buyer with you, there's no harm in getting the buyer's signature on the bill of sale notarized.

I'm one of those that don't do that. I figure it's enough to have the buyer's signature on my duplicate bill of sale. Pretty easy to prove who signed what.

Like I said some might say it's over kill. The only reason I recommend it is the AS IS part.  Then you have some added ammunition against the "you promised me free oil changes for life" or to provide plates for six months because I am poor sob story, or the you never told me it was a 16 year old car and would need new tires eventually etc.  Whatever litany of things that can come back to bite you from the "no good deed goes unpunished" when something goes wrong and they want YOU to pay for it.  Then their signature is notarized and there is ONE more witness.

adjuster jack:

1 - A bill of sale (even for $1.00), with the date and time of the sale, that says you are selling the car AZ IS with no warranties or guarantees of any kind. Signed by both parties, in duplicate, and you keep one.

I disagree. The poster said this was to be a gift, not a sale. It should be documented that way as well. Implied warranties don't apply to gifts, and documenting it as a supposed sale could lead to tax difficulties. There are no federal tax problems and likely no state tax issues either for gifts so long as the total gifts you give this person this year are less than $13,000.

Taxagent:

adjuster jack:

1 - A bill of sale (even for $1.00), with the date and time of the sale, that says you are selling the car AZ IS with no warranties or guarantees of any kind. Signed by both parties, in duplicate, and you keep one.

I disagree. The poster said this was to be a gift, not a sale. It should be documented that way as well. Implied warranties don't apply to gifts, and documenting it as a supposed sale could lead to tax difficulties. There are no federal tax problems and likely no state tax issues either for gifts so long as the total gifts you give this person this year are less than $13,000.

I am going to disagree with you on this one.  There are no tax implications of selling an old car, because your basis is always greater than the value of the car.

What adjuster jack suggested is so much safer, in regards to liability issues.  Liability issues, when it comes to cars, is more serious than any potential tax issue.

LdiJ:

There are no tax implications of selling an old car, because your basis is always greater than the value of the car.

I disagree. You are assuming a car that was never used for business use, and thus not depreciated. We don't know that to be the case.

LdiJ:

What adjuster jack suggested is so much safer, in regards to liability issues. Liability issues, when it comes to cars, is more serious than any potential tax issue.

No, it's not safer with regards to liability issues. It's arguably worse. The law provides buyers of goods more protections than it does donees of gifts. In addition to implied warranties other possible protections for buyers may arise. In some states, for example, the seller must get certfication that the car passes emissions inspection immediately prior to the sale. That's an additional cost that the donor of a gift does not have to bear.

I agree it's a good idea to document the transaction, but why not simply document the gift and get the donee to sign off on an acknowledgement of the gift? That would meet the concern for any liability protection issues and more accurately reflects the nature of the transaction.

LdiJ:

What adjuster jack suggested is so much safer, in regards to liability issues. Liability issues, when it comes to cars, is more serious than any potential tax issue.

Taxagent:

No, it's not safer with regards to liability issues. It's arguably worse. The law provides buyers of goods more protections than it does donees of gifts. In addition to implied warranties other possible protections for buyers may arise. In some states, for example, the seller must get certfication that the car passes emissions inspection immediately prior to the sale. That's an additional cost that the donor of a gift does not have to bear. I agree it's a good idea to document the transaction, but why not simply document the gift and get the donee to sign off on an acknowledgement of the gift? That would meet the concern for any liability protection issues and more accurately reflects the nature of the transaction.

Taxagent is right. If I'd thought a little further beyond the bill of sale I'd have caught that.

Here in AZ, the registration fee has nothing to do with the sale price of the vehicle and there is no sales tax between private parties, so there's no DMV forms to fill out like in other states.

Documentating a gift would work fine..

Great information, thanks.

The plan is to give, not sell, the car to the woman who needs it. It is old, has never been used for business, and  if I used it more often, I would keep it. Instead of using a "bill of sale" I'll make up a similar paper, titled "gift" or something, and have both of us sign the same paper twice, a copy for me, one for her.

Again, thanks.

MR

That'll work.

But don't forget the other stuff I wrote about AZ requirements.

You'll want to make sure you get all that right.