I live in California, and I’m receiving a car from my friend for free. I’ve been doing some research and it seems like friends can’t gift cars each other, from the point of view of taxes.
From my understanding, if the transfer amount between friends is $0, the DMV will assign a price based on a fair market value and charge a use tax based on this.
Questions: 1. What are the common exceptions that exist? For example, what are tax credits and how can I find out if it will apply to this situation. 2. Is the use tax applied for every transfer of title? My friend had bought this car after leasing it, from the dealer. If the use tax was paid during that transaction, does that exempt me from paying taxes during this transaction? 3. How is the fair market value decided? 4. What would be a reasonable deviation from fair market value to list as the transfer? E.g. if the KBB value for the car is $8,000 (assuming this is how the DMV decides what the fair market value is), would it be reasonable to say that the car was “sold” for $5,000 to limit the taxes I’d have to pay? How low can I go? 5. What is the process for getting the vehicle appraised, and is this worth doing? There are some cosmetic defects on the car, nothing major from my standards, but maybe it’d help if there was a third party that states the car is worth less than the market value.
TL;DR My friend is giving me her car. What amount should I write down was the sale of the vehicle transfer to minimize the taxes I have to pay? The car is in California, made in 2013, KBB value about $8000, in decent condition, and was bought initially after a leasing it from the dealer.
August 11, 2018 at 08:53PM
