Many of us dream of surprising a loved one with a new or restored car they’ve always wanted. While this dream isn’t often in the budget, it’s still not unusual to find families looking to gift an older, as-is vehicle to a loved one who needs access to transportation.

Doing it correctly and legally, however, involves more than simply handing over the keys. If you are thinking about gifting a vehicle to a friend or family member, here are a few questions you should consider first.

1. Can They Afford It?

This is the most important question you need to answer before deciding to gift someone a car. If the person you want to give the car to only needs help getting the money together for the purchase, then that’s great! It will be a gift they will surely appreciate.

However, if the person you want to give the car to is not in a good financial place to afford the insurance premiums, gas, parking, maintenance, or any unexpected repair costs, then gifting them a car may do more financial harm than good.

2. Should I Sell My Car to Them for $1?

No. When choosing between gifting a car and selling it for $1, gifting it is the simpler and best option. When you sell them the car, the person who receives it will be forced to pay sales tax to the state based on the vehicle’s fair market value—which will be significantly more than the $1 you sold it for.

3. Are You Gifting an Old Car or a New One?

If you plan to gift someone a car you own, you need to locate the title. If you are still making payments on the car, then the loan company has the title, and you will not be able to gift it until you finish paying off the loan and receive the title in the mail from the loan company.

If you purchased the car outright or already finished paying off your loan and can’t locate the title, you can request a duplicate copy from your local OMV, although you will need to pay a replacement fee.

How to Transfer a Vehicle Title

The person gifting the car will need to fill out the seller’s portion of the transfer section on the back of the title, and the person receiving the gifted car will need to fill out the buyer’s portion. Use black pen and full names only—do not use nicknames.

The gift giver will need to sign the title in the presence of at least two witnesses or a notary, according to Louisiana law. If only witnesses are present at the signing of the title, at least one of those witnesses must sign an Acknowledgement of Witness in front of a notary to ensure the title is notarized.

In the field where it asks for the sales price, you may simply fill in “gift.”

In Louisiana, you will also need to:

  • Get a lien release document from the lien holder if the title notes any unreleased liens.
  • Complete a Vehicle Application form to have the vehicle re-titled in the recipient’s name.
  • Complete and notarize an Act of Donation of a Movable form.
  • Complete an Odometer Disclosure Statement if the vehicle is less than 10 years old (if the vehicle is more than 10 years old, you can skip this step).
  • Complete the online Notice of Transfer on the Louisiana OMV website.
  • Pay a title transfer fee.
  • Register the car in the recipient’s name.

After completing the Notice of Transfer, remove the old license plates from the vehicle and either destroy them or return them to the OMV.

Buying a Car as a Gift

If you are buying either a new or used car to gift to someone, you will have four main options.

  • Purchase the vehicle outright and follow the steps outlined above.
  • Take out a loan in your name, but register the title under your and the gift recipient’s names.
  • Bring the gift recipient with you to the dealership, gift the down payment, and have the gift recipient finance the rest of the vehicle’s cost themselves.
  • Bring the gift recipient with you to the dealership and co-sign the loan.

4. Do They Have Auto Insurance?

Make sure the person you are gifting the car to purchases auto insurance. They cannot legally drive or register the car in their name without showing proof of insurance.

Louisiana requires liability coverage of at least:

  • $15,000 for bodily injury per person
  • $30,000 for bodily injury per accident
  • $25,000 for property damage per accident

Drivers who drive without insurance in Louisiana may not be eligible for as much or any compensation if they are injured in an accident.

5. Do They Live in Another State?

Title-transfer requirements can vary from state to state. If you are unsure whether to follow the requirements for Louisiana or for the state the person you wish to give the car to lives in, always follow the rules of the state the car will be registered in.

6. Does Gifting a Car Affect My Taxes?

In most cases, gifting a car will not affect your taxes for better or worse.

Unless you are gifting a car to a charity or religious organization, you will not be able to get a tax deduction for gifting your car. You may be charged taxes on large gifts, but this federal “gift tax” only applies if the value of the car you want to gift is more than $18,000 as of 2024. If the car is worth more than $18,000, the giver will be required to pay a gift tax and the recipient also may be required to pay a tax on the gifted car.

When You Have Questions After a Car Accident, Call Dudley DeBosier

If you or a loved one have been injured in a car accident that totaled your car and left you unable to work, you shouldn’t need to depend on the goodwill of others to help you get back on your feet.

Our team of New Orleans car accident attorneys helps injury victims get the money they need after car accidents caused by others’ negligence, and we aren’t afraid to take your claim to court if the insurance companies try to reduce your benefits or deny you compensation. Call today for a free consultation.

Originally published December 16, 2019.

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