Everything You Need to Know About Giving a Car as a Gift in Ontario

If you are considering donating a car to a family member or want to sell your car to purchase a new or used vehicle, it can be a thoughtful and smart decision. It not only saves your loved one from paying additional taxes, but it also allows you to clear up your driveway for your next car. If you plan on gifting a car in Ontario, take a look at the following information to get started.

Eligibility of the Recipient

Before gifting a car, verify that the person you want to give it to falls under the category of a family member according to the ServiceOntario regulations. The list of eligible family members includes blood relatives, in-laws, step-family members, and family members through marriage. The following family members are entitled to receive a gifted car:

  • - Children
  • - Grandchildren
  • - Parents
  • - Grandparents
  • - Spouse
  • - Siblings
  • - Stepchildren, stepparents, step-grandparents, or step-grandchildren
  • - Parents-in-law or children-in-law

The main benefit of gifting a car to one of these family members is that they are not required to pay the retail sales tax (RST) on the value of the vehicle. That means you are excluding the entire car price along with 13% of RST from the recipient.

However, if you plan to transfer the ownership of the car to a non-family member or a friend, the recipient will have to pay RST based on the Canadian Red Book value of the vehicle, similar to when you sell a car privately.

Steps to Follow While Gifting a Car

If you plan to gift a car in Ontario, follow these steps to avoid any conflicts or complications during the process. These measures will ensure a seamless and smooth experience that gets your family member one step closer to owning their car at a reduced cost.

Complete Vehicle Payment

Before gifting a vehicle, you must pay for it in full. This ensures that you have a transparent title that allows you to transfer the ownership to the recipient. If you have a balance on your loan, try to pay it off as soon as possible. When you have completed the payment, you should receive a lien release from your lender that eliminates any financial obligations to a third party.

No Gift Tax

Although a recipient does not pay retail sales taxes when you gift a car in Ontario, some people may be worried about a gift tax. The good news is that there is no gift tax in Canada, nor in any provinces in the country. As a result, you won't have to pay any gift taxes, as you would have to pay in the United States.

Recipient's Financial Consideration

Giving a car to a family member may seem simple, but owning a vehicle comes with a variety of expenses, both upfront and ongoing. Beforehand, consider the financial situation of the recipient. These costs may include:

  • - Insurance
  • - Maintenance
  • - Gasoline
  • - Registration and fees
  • - Parking

Based on recent studies, the monthly cost of owning a vehicle in Canada is approximately $500. This indicates that if you're planning to gift a car to someone who is unemployed, underemployed, or in school, determine if they can afford a $500 financial hit every month. You may also want to have a candid discussion with them to determine if gifting a car is the right move.

How to Gift a Car in Ontario

Once you have paid off your car loan and determined it's a feasible gift for your recipient, it's time to take care of the paperwork. To begin the process, find your nearest ServiceOntario centre. This is where you'll accomplish all the paperwork and ensure that your recipient receives proper tax exemptions from RST. Here's what you need to do to complete the process of gifting a car in Ontario.

Vehicle Transfer Requirements in Ontario

If you want to give your vehicle as a gift to a family member in Ontario, you will still need to complete certain paperwork to transfer the ownership smoothly. These are the following documents and forms that you need to obtain and fill out:

  • Bill of Sale

Even though you are not technically selling your vehicle, it is still advisable to create a bill of sale. You can easily create your own by handwriting it or using the pre-written bill of sale form included in the used vehicle information package (UVIP). This document helps streamline the transfer of ownership process, so make sure to include relevant information such as the Vehicle Identification Number (VIN), vehicle make and model, mileage, and others.

Affidavit for Family Gift of a Used Motor Vehicle in Ontario

This sworn statement is a vital piece of paperwork that attests to the vehicle being given as a gift, qualifying it for the RST tax exemption. Without the affidavit, you cannot claim this exemption. To make it official, both the donor and the recipient must sign it in the presence of a notary public or a lawyer.

Vehicle Ownership Permit

Every new or used vehicle comes with a green paper known as vehicle ownership permit, which contains essential information about the car. You need to fill out the transfer portion found at the back when you gift a car to someone to change its status from "owned" to "sold". Additionally, the recipient may have to complete the plate portion of the permit for the vehicle transfer of ownership if they have plates they want to put on the car.

Safety Standards Certificate

To ensure compliance with emissions laws, you require a Safety Standards Certificate when you gift a car in Ontario. In 2019, the Drive Clean emissions test was eliminated, but this certificate is still mandatory. Note that spouses do not need the SSC but must complete a spousal declaration.

Plate Transfer Declaration Form

When you're giving your car to your spouse, parents or children, fill up this form to show that you're transferring your license plates to a new owner. However, if you're gifting the car to someone other than these family members, you cannot transfer the license plate.

Driver's License

Both the donor and the recipient need to show their driver's licenses at ServiceOntario to prove their identity while completing the transaction.

Proof of Insurance

Proof of insurance is a mandatory requirement for both parties to register a vehicle with ServiceOntario, as driving without insurance is illegal in Canada.

Additional Costs

Keep in mind that the donor or the recipient will have to pay the fees and costs related to the transaction. New ownership requires the new owner to pay for a vehicle permit costing $32 as of 2022. If a new plate is required, there will be an additional fee of $27.

Giving a car as a gift in Ontario is a good option as it exempts the recipient from sales tax and saves your time and effort required to sell it to a private party. Make sure to complete all the necessary paperwork to transfer ownership correctly.

If donating your car doesn't align with your specific needs, don't worry in the slightest! There's no need to fret as you can still exchange or sell your automobile via Clutch. Just input some information regarding your vehicle and receive a concrete offer in just a few minutes. Afterward, arrange for a pickup or delivery time and your transaction is complete. It's truly as easy as that."

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