Gifting a car in Indiana is legal, and the transfer runs through the Bureau of Motor Vehicles with a signed title, a bill of sale, and a short list of forms. The bigger question is money: Indiana charges 7% sales tax on vehicle transfers, but the state waives that tax when the car moves between certain close relatives. Everything else about the process, from fees to insurance timing, follows from whether your gift qualifies for that exemption.
Who Qualifies for the Family Sales Tax Exemption
Indiana Code 6-2.5-5-15.5 exempts a vehicle title transfer from the state’s 7% gross retail tax only when the person being added to or removed from the title is the current owner’s spouse, child, grandparent, parent, or sibling.1Indiana General Assembly. Indiana Code Title 6 Article 2.5 Chapter 5 Section 6-2.5-5-15.5 – Motor Vehicles; Intrafamilial Title Transfers That list is exact. Aunts, uncles, cousins, in-laws, stepchildren not legally adopted, and friends are not on it.
If your recipient falls outside that group, the transfer may be subject to Indiana’s 7% sales or use tax on the vehicle’s fair market value.2Indiana Department of Revenue. Sales Tax Information Bulletin 84 On a $10,000 car, that’s $700 the recipient pays at the BMV counter. When in doubt about how your relationship is classified, ask the BMV before you file.
Paperwork to Bring to the BMV
Gather everything before you go. One missing form means a wasted trip.
- The original certificate of title, free of any liens. The donor signs the assignment section and writes in the recipient’s name, address, and $0 as the sale price.3Indiana General Assembly. Indiana Code Title 9 Article 17 Chapter 3 Section 9-17-3-3.4 – Sale or Transfer of Ownership of Vehicle
- A bill of sale listing both parties, the vehicle’s make, model, year, and VIN, the date, and a clear note that the vehicle is a gift. No money changes hands, but the paper trail matters.
- State Form 48841, the Certificate of Gross Retail or Use Tax Exemption, filled out by the recipient to claim the family exemption.4Indiana Bureau of Motor Vehicles. Bureau of Motor Vehicles – Title Forms
- An Odometer Disclosure Statement (State Form 43230) for vehicles model year 2011 and newer transferred in 2026. Model year 2010 and older are exempt. Both parties sign, and the mileage must match the odometer.5eCFR. 49 CFR Part 580 – Odometer Disclosure Requirements
- Government-issued photo ID for both the donor and the recipient.
If a Lien Is Still on the Title
You can’t gift a car with an outstanding loan. The lienholder’s name is on the title, and the BMV won’t process a transfer until the lien is released. Once the loan is paid, the lienholder clears it through the BMV’s electronic lien system, and a clean paper title is mailed out if that’s how the vehicle was originally titled.6Indiana Bureau of Motor Vehicles. BMV – Electronic Lien Overview Give this a few weeks; don’t wait until the day before you plan to hand over the keys.
Filing the Transfer
Both parties should go to a BMV branch together. If one can’t, the signatures on the title assignment and odometer disclosure will likely need to be notarized ahead of time. A BMV representative reviews the documents, collects any remaining signatures, and issues a temporary registration to the recipient on the spot. The permanent title arrives by mail.
The recipient has 45 days from receiving the vehicle to apply for the new title.7Indiana Bureau of Motor Vehicles. BMV – Buying and Selling a Vehicle Miss that window and there’s a late filing penalty. Indiana law also requires the donor to hand the endorsed title over at the time of transfer,3Indiana General Assembly. Indiana Code Title 9 Article 17 Chapter 3 Section 9-17-3-3.4 – Sale or Transfer of Ownership of Vehicle so don’t sit on it.
What the Recipient Pays
Even with the family sales tax exemption, the recipient still owes standard BMV charges:8Indiana Bureau of Motor Vehicles. Indiana BMV Fee Chart
- $15 title fee for issuing the new title.
- $21.35 registration fee for a standard passenger vehicle.
- $9.50 plate transfer fee for moving existing plates or getting new ones.
- An annual vehicle excise tax based on the car’s original value and age, collected at registration. Newer, higher-value cars can run several hundred dollars. Vehicles nine years old and up bottom out at $12 to $50 depending on original value class.9Indiana General Assembly. Indiana Code Title 6 Article 6 Chapter 5 Section 6-6-5-3 – Valuation of Vehicles
If the exemption doesn’t apply, add 7% sales or use tax on the vehicle’s fair market value on top of those fees.
Federal Gift Tax
The federal gift tax rarely touches an ordinary car gift. For 2026, the annual gift tax exclusion is $19,000 per recipient, so a vehicle valued at or below that amount requires no federal gift tax return.10Internal Revenue Service. Gifts and Inheritances The recipient never pays income tax on the gift regardless of value.
If the fair market value tops $19,000, the donor files IRS Form 709. That filing usually doesn’t produce a tax bill; it just counts the excess against the donor’s lifetime gift and estate exemption, which is large enough for most people to absorb an expensive car with room to spare. The IRS accepts methods like comparable sales prices or a professional appraisal to establish value.11Internal Revenue Service. Publication 561 – Determining the Value of Donated Property
Insurance Before the Recipient Drives
Indiana requires liability coverage on any vehicle driven on public roads: minimum $25,000 for bodily injury per person, $50,000 per accident, and $25,000 for property damage per accident.12Indiana Bureau of Motor Vehicles. Proof of Financial Responsibility The recipient needs an active policy on the gifted car before driving it off. Don’t assume an existing policy automatically covers a newly acquired vehicle for a set number of days. Call the insurer, add the car, and get written confirmation.
To finish registration, the recipient brings the new title or temporary registration, proof of Indiana residency, and proof of insurance back to the BMV. Registration, plate fee, and excise tax are collected then.
Protecting Yourself as the Donor
Once you sign the title over, you want a clean break. Keep copies of the signed title, the bill of sale, and every form filed at the BMV. Those records prove the exact date you transferred the vehicle, which matters if the recipient causes an accident or collects tickets before finishing their paperwork. The sooner they file for the new title, the sooner your name comes off the state’s records.
Call your own insurance company to drop the vehicle from your policy after the transfer. Keeping a car you no longer own on your coverage wastes money and creates a mess if the new owner ever files a claim on it.