Q. My father, who lived in Pennsylvania, has passed away and my sister, who also lives in Pennsylvania, has had her car title transferred. She has decided that she does not want the vehicle and wants to give it to me as a gift. I live in New Jersey. What are the tax ramifications for both of us since the vehicle is titled in Pennsylvania and I’m going to register and titrate it in New Jersey?
A. This is how it works.
Assuming your sister has a clear title to the car and there is no outstanding loan, your sister will need to transfer ownership to you, which is usually done by signing the back of the title.
When you rename the car in your name in the state of New Jersey, you’ll need to complete an NJMVC universal title application, said Gerard Papetti, a chartered financial planner and certified public accountant with U.S. Financial Services in Fairfield.
You will also need to follow the instructions regarding the New Jersey sales tax exemption, as outlined on the New Jersey Motor Vehicle Commission website:
He says, “If the vehicle is a gift, the sale price should be noted as ‘GIFT’. If the information appears to be modified or altered, additional documents may be required by the Motor Vehicle Commission.
Based on the fact that you received the car as a gift, no New Jersey sales tax will be due, Papetti said.
As with everything donation tax this may be due, let’s take a look at how the Federal, Pennsylvania and New Jersey tax rules work.
Federal gift tax law allows a U.S. taxpayer to donate to a person up to annual tax exclusion on donations of $ 15,000 a year, Papetti said. “A married couple can donate up to $ 30,000 even if only one spouse donates as long as the non-donor spouse consents to the sharing of the gift on the Federal Gift Tax Return, Form 709.”
Therefore, if the car is worth $ 15,000 or less – $ 30,000 if your sister is married and the donations are shared – there are no federal tax consequences on the donations, Papetti said. If the car is worth more than $ 15,000 – or more than $ 30,000 if your sister is married and the gift separates – Form 709 must be completed to report the excess over the annual exclusion gift amount, did he declare. The excess is called a “taxable gift” and will reduce your sister’s lifetime tax exemption by $ 11.7 million on donations.
And finally, he said, neither Pennsylvania nor New Jersey have gift tax, so no tax is owed on your sister’s car donation, he said. .
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Karin Price Mueller writes on Bamboo column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com‘s weekly electronic newsletter.