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Old 06-18-2009, 07:47 PM
 
Location: New Jersey
1,290 posts, read 1,698,145 times
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Default Buying car from a relative -- how to minimize sales tax?

I am 'buying' a car from my relative for $1. KBB value of this car is about 7k.

Any suggestions on how I should manage this deal so I do not have to pay any sales tax or pay minimum legally?
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Old 06-18-2009, 07:55 PM
 
95 posts, read 305,563 times
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According to the NJ DMV:
"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."

State of New Jersey - Motor Vehicle Commission
(at the bottom of the page)

I'll be in that same boat in a few weeks when my Dad sells me my own car for $1 (was in his name for insurance purposes). So I think we should be ok so long as we indicate it's a gift.
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Old 06-19-2009, 10:15 AM
 
Location: In My Own Little World. . .
3,238 posts, read 5,629,559 times
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Eventually, you will be notified by the Division of Taxation that you owe sales tax. THAT NOTICE GOES TO EVERYONE who pays less on sales tax than what the vehicle is worth. There will be a place on the back of the form they send you where you can indicate it was a gift and have the person who gave the "gift" fill out and sign the statement.
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Old 06-19-2009, 11:40 AM
 
Location: Ocean County, NJ
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Yep, gift it. That's what I did when I sold my old car to a friend.
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Old 06-19-2009, 11:47 AM
 
Location: Stewartsville, NJ
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colleen is right.... a tax bill will come in the mail based on "book value" of the vehicle. Guess they caught onto the $1 car sale deal : )
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Old 06-19-2009, 12:57 PM
 
Location: New Jersey
1,290 posts, read 1,698,145 times
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Ok I just read IRS guidelines that starting 2009 a relative can give a gift up to 13k without any tax implication. I guess I will just declare the fair value of the car and transfer the title.

Thank you everyone for all the help!
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Old 06-19-2009, 09:27 PM
 
Location: NJ & NV
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I'm not sure that anything the IRS rules about like that would have any direct effect on State sales tax.
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Old 06-20-2009, 07:37 AM
 
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Quote:
Originally Posted by colleeng47 View Post
Eventually, you will be notified by the Division of Taxation that you owe sales tax. THAT NOTICE GOES TO EVERYONE who pays less on sales tax than what the vehicle is worth. There will be a place on the back of the form they send you where you can indicate it was a gift and have the person who gave the "gift" fill out and sign the statement.
Years ago, I sold a relative my vehicle for less than book value and she was notified by the Division of Taxation that she owed tax on the "true" value of the vehicle. I don't know what eventually happened, though.
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Old 06-20-2009, 10:22 PM
 
Location: In My Own Little World. . .
3,238 posts, read 5,629,559 times
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Quote:
Originally Posted by timneh5 View Post
Years ago, I sold a relative my vehicle for less than book value and she was notified by the Division of Taxation that she owed tax on the "true" value of the vehicle. I don't know what eventually happened, though.
Yes, as I said in a previous post they send that notice to everyone. If you don't read the entire notice, you may think you have to pay that tax, but if it was a gift and you can get the person who gave you the gift to fill out the affidavit, you're off the hook.

Also, if you did buy the car, and it wasn't a gift, but you paid less than the true value of the car, get a bill of sale, and/or save the cancelled check to prove the price you paid. Try to NEVER pay cash. No proof of what you paid will result in a tax bill.

NJ Division of Taxation relies on people not understanding the letter, and sending in the tax money. A word to the wise. . . . .
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