"Buying" my car from my mom in NJ. What's the best/cheapest way to do this?
September 29, 2012 10:02 AM   Subscribe

"Buying" my car from my mom in NJ. What's the best/cheapest way to do this?

[posting for a friend]
So my family bought a car a few years ago under my mom's name. I've been paying the monthly payments for it ever since and it's finally paid off. I'd like to get the car under my name now that we have the title.

What's the best way to do this and how much will it end up costing? Is it possible to claim the sale of the car for $1.00 (my mom essentially selling the car to me) or should we mark it as a gift? Basically, I'm looking for the cheapest or easiest way to do this.

Additional info: I'm in NJ and the car is a 2007 Civic.
posted by carpyful to Law & Government (12 answers total)
I think you're overthinking this - just go to the DMV together and transfer the title, register the car in your name, and then you're done. This is what we did when my mom gave me her old car after college.
posted by echo0720 at 10:11 AM on September 29, 2012

This is actually a good thing to overthink. When I sold my '96 C280 in Seattle earlier this year for $1000, the department of licensing required that I sign a document confirming that I did, in fact, sell the car for $1000. I added a note about how the cylinders were leaking and the car was pretty much worthless to me since it couldn't start.

The reason for this is that you pay sales tax on the sale of a car in WA. If the state thinks you are underreporting your sale price, they will just charge you tax based on what they think the blue book value is. NJ may do the same thing, so it is worth doing some research and getting it right.
posted by b1tr0t at 10:20 AM on September 29, 2012

Also with considering - according to KBB, a basic '07 Civic in decent shape with 50k miles is worth around $10k. That is getting close to the IRS annual gift exclusion, so you might need to be prepare to write a substantial check to the IRS if you have a nicer Civic and take the gift route.

A little research now could save you a lot of future pain.
posted by b1tr0t at 10:25 AM on September 29, 2012 [1 favorite]

Best, cheapest way? Keep it in her name and just pay for the registration/inspection/repairs.

As b1tr0t points out, some (most, I think?) states will charge you insane sales tax even if you give a car away.
posted by pla at 10:27 AM on September 29, 2012

I have done this kind of thing twice. You get paperwork from the DMV and sign "yea, verily, I sold the car". $1 exchanges hands. Totally legal. No need to worry about gift tax law or whatever.
posted by Michele in California at 10:27 AM on September 29, 2012

In many states, including mine (California), there is an easier procedure for transferring vehicle titles specifically between family members. So you might investigate that.
posted by eak at 10:28 AM on September 29, 2012

According to the State of New Jersey Motor Vehicle Commission:

A vehicle is only exempt from sales tax if the customer indicates on the purchase price that it is a gift on the sales tax form.

posted by b1tr0t at 10:48 AM on September 29, 2012 [1 favorite]

Yeah, don't leave it in her name, it makes her liable for that next fender bender you have when someone decides to sue, and sues HER as the owner.

In our state a car changing hands between relatives has different rules and is pretty much tax free. Just call the DMV on Monday and find out how they suggest you handle it.
posted by HuronBob at 11:43 AM on September 29, 2012

Yeah I should have mentioned I did this in another state (both times in Georgia). However, in New Jersey, sales tax is calculated based on sales price (not blue book value) and is typically 7%. That would be 7¢ if you sold it for $1.

Generally speaking, it is legal to sell something of "real value" for just a dollar. There is a legal term for that, but I can't think of it.

If you have any reason to think you might go over $12,000 in gifts for the year by listing this car as a gift, I would think paying 7¢ in tax for a $1 sale would be the cheap thing to do.
posted by Michele in California at 11:49 AM on September 29, 2012

That is getting close to the IRS annual gift exclusion, so you might need to be prepare to write a substantial check to the IRS if you have a nicer Civic and take the gift route.

This isn't true. First, the gift would almost certainly be under the annual gift tax exemption of $13,000, second even if it weren't the excess would be applied to the lifetime exemption of over $5,000,000 in 2012, and third the asker would owe no taxes even if the above were not true, only the giver would owe anything.

Just have the car gifted. It'll be fine.
posted by Justinian at 12:16 PM on September 29, 2012 [1 favorite]

Why do you have to have the title in your name?

Sometimes having a car in your parents name can be to your advantage.
1. If you are all on one insurance, usually your insurance agent will put the highest liability, kids, on the cheapest cars to lower the premiums, but still everyone is covered on all cars. But his being a Civic I don't think it will make a huge change. Also the premium depends on where one lives. If the insurance thinks your mom's home neighborhood is safer than yours, the premium will be cheaper.
2. You might need to get license plates transferred or required to get new plates also. They are assigned to the owner of a vehicle. So here is extra fee for that.
3. Some states, like IL, do not tax cars by the amount they were sold for. IL, for example, has a table and taxes cars for that. If the table says you pay $100 tax on this vehicle, it doesn't matter if you paid, or made it look like you've paid, $1 or $100,000 because of people "selling" cars for a $1.
posted by AdamG8GXP at 7:23 AM on October 2, 2012

Ended up listing it as a gift and transferring it over. Doesn't seem like it'll be an issue but I guess we'll see once tax season rolls around.
Thanks for all the help!
posted by carpyful at 4:51 PM on November 18, 2012

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