Most people have to pay for their car themselves, but a few lucky individuals have a car purchased for them as a gift. This is not just the playground of the rich and famous. Teens and first drivers may well have their first car given to them as a gift, as they simply do not have the cash to make the investment themselves. If you are looking to purchase a car as a gift, then there are a few things you should consider to keep your thoughtful and generous gift from causing a headache.

You may need to sign a gift form

If you decide to give somebody a car as a gift, even if it is a family member, you may need to complete a gift form. This is because taxes can be waived for recipients of such gifts in some states. As such, in order to ensure that the transaction is entirely above board and legal, the appropriate documentation must be complete. Check your state motor vehicle agency to confirm whether or not you need to fill out a gift form.

You will need to sign a title transfer

When you give someone a vehicle, you need to legally sign ownership of that vehicle over to the other person. Similarly, if you are receiving a car as a gift, then you need to ensure that ownership has been legally transferred to you. You should check with your state motor vehicle agency about what documentation is required and how and when it should be filed.

The recipient must complete the appropriate tax forms

Normally, the recipient of the gift will be required to complete the paperwork related to tax for the transaction. The principle is that only you know how much you earn, and therefore how much tax you owe. If you are gifting a car, it is worth ensuring that the recipient understands this obligation. The requirements differ from one state to another. In some cases, the tax office will calculate the tax for you if you make an appointment. In other states, you have to fill out a series of forms. In other states, you do not need to fill out a form at all, as there is no tax exemption. You should always check the tax regulations with your local office.

There may be other requirements

In some states, other requirements must be fulfilled, although these could be waived if the gift is to a family member. In California, for example, a smog test is required for all new owners, in order to ensure that the car meets new emissions requirements. If you give the car to a family member, however, you do not need to carry out this test. Check with your local DMV agency to be sure.