To transfer a car title as a gift in Alabama, the current owner signs the title over to the recipient with a gift bill of sale and an odometer disclosure, and the recipient takes those documents to the county licensing office to title and register the vehicle within 20 calendar days. A genuine gift is exempt from Alabama automotive sales tax, and most vehicles fall below the $19,000 federal gift tax exclusion for 2026, so the process is usually paperwork rather than tax planning.
Paperwork You Need Before You Sign Anything
Start with the title itself. It must be the original certificate, and it must be lien-free. If a lender is still on the title, the donor has to pay off the balance and get a lien release first. Alabama will not issue a new title while a lienholder is recorded on the existing one.1Alabama Department of Revenue. View All Lien, Titles FAQs Electronic titles held by banks can take a couple of weeks to convert to paper, so request the release early.
Alongside the title, you’ll need:
- A gift bill of sale naming both parties with addresses, the vehicle’s VIN, year, make, and model, and the word “gift” written where the price would go.
- An odometer disclosure statement on Form MVT 5-5, required for any vehicle less than 20 model years old with a gross vehicle weight rating of 16,000 pounds or less. For a 2026 transfer, that covers any vehicle from model year 2007 or newer. Both parties sign it.2Alabama Department of Revenue. Odometer Disclosure Statement MVT 5-5
- A valid government-issued ID for each person.
- A physical Alabama address for the recipient’s title application.3Alabama Department of Revenue. Titles FAQ Categories
Signing the Title and Bill of Sale
On the back of the title, the donor completes the assignment section: recipient’s full legal name, Alabama address, and the current odometer reading if the vehicle isn’t mileage-exempt. The donor then signs exactly as the name appears on the front. Name and signature mismatches are one of the most common reasons county offices reject applications, so check both before you sign.
The odometer number on the title assignment has to match the number on Form MVT 5-5 exactly. County officials compare them, and any discrepancy delays processing.3Alabama Department of Revenue. Titles FAQ Categories
Alabama doesn’t require a specific bill of sale template, but the document should clearly state “gift” as the consideration and be signed by both parties. Notarization is optional but adds legal protection if ownership is ever disputed. Alabama notaries can charge up to $10 per notarial act.4Alabama Secretary of State. Act 2023-548 – Notary Public Fees
Completing the Transfer at the County Office
Take the signed title, gift bill of sale, odometer form, and IDs to the county licensing official. In most Alabama counties that’s the probate judge’s office; some counties have a separate license commissioner. Licensed Alabama motor vehicle dealers and financial institutions can also process title applications as designated agents of the Department of Revenue.3Alabama Department of Revenue. Titles FAQ Categories
Both parties showing up together makes things go smoother, but if the donor has already signed the title assignment and the bill of sale, the recipient can often finish alone. When the donor genuinely can’t attend, Alabama accepts a power of attorney on Form MVT 5-13, which must have original signatures and no alterations or strikeovers.5Alabama Department of Revenue. Power of Attorney MVT 5-13
A VIN inspection is only required when a vehicle is being titled in Alabama for the first time, including new vehicles and any car coming from out of state.6Legal Information Institute. Alabama Code 810-5-75-.55 – Motor Vehicle Inspection Requirements A car that already has an Alabama title doesn’t need one.
Fees and the 20-Day Deadline
The recipient pays a $15 title application fee plus a $1.50 agent commission, for a total of $16.50.7Alabama Legislature. Alabama Code 32-8-6 Registration fees for passenger cars and pickup trucks range from $23 to $105 depending on the vehicle type, and some counties add small local fees.8Alabama Department of Revenue. Motor Vehicle Registration Fees
The clock starts the day after the recipient takes possession. Alabama allows 20 calendar days from the date of acquisition to title and register without penalty. If day 20 falls on a weekend or holiday, the deadline moves to the next business day.9Alabama Department of Revenue. How Many Days to Title and Register Miss it and there’s a $15 late registration penalty plus interest that keeps accruing until you register.10Alabama Administrative Code. Motor Vehicle Registration Periods, Delinquency, Penalty and Interest
Why a Gift Isn’t Taxed as a Sale
A genuine gift with no money changing hands is exempt from Alabama’s automotive vehicle sales and use tax under Section 40-23-100 of the Code of Alabama.11Alabama Legislature. Alabama Code 40-23-100 – Definitions That’s why the bill of sale matters. If it doesn’t clearly say the transfer is a gift, the county office may assess tax on the vehicle’s fair market value. Writing “$0 — gift” on the sale price line and having both parties sign is the cleanest way to establish the exemption.
If the recipient is actually paying anything, even a reduced price, the transaction isn’t a gift and tax applies to whatever amount changed hands. County officials process these transfers constantly and recognize a disguised sale.
Insurance Before the Recipient Drives
Alabama law requires liability insurance on every vehicle driven on public roads.12Alabama Legislature. Alabama Code 32-7A-4 – Liability Insurance Required The donor’s policy stops covering the car once ownership transfers, so the recipient needs coverage in place before driving. Alabama’s minimums are $25,000 for bodily injury or death per person, $50,000 for total bodily injury or death per accident, and $25,000 for property damage per accident. A combined single-limit policy of at least $75,000 per accident also satisfies the requirement.13Alabama Department of Revenue. Mandatory Liability Insurance
If the recipient already has an auto policy, most insurers offer a grace period of 7 to 30 days to add a newly acquired vehicle. Don’t rely on it. Call the insurer, add the car the day the title changes hands, and skip the risk of a gap.
Federal Gift Tax if the Car Is Worth More Than $19,000
The federal annual gift tax exclusion for 2026 is $19,000 per recipient.14Internal Revenue Service. IRS Tax Inflation Adjustments for Tax Year 2026 If the vehicle’s fair market value is under that, the donor files nothing with the IRS and owes no gift tax.
If the value exceeds $19,000, the donor files IRS Form 709 by April 15 of the following year. A car gifted in 2026 has a Form 709 deadline of April 15, 2027.15Internal Revenue Service. Instructions for Form 709 Filing doesn’t automatically mean tax is owed. The amount above $19,000 counts against the donor’s lifetime gift and estate tax exemption, which is large enough that few people ever pay actual gift tax. Married couples can also elect to split gifts, effectively doubling the exclusion to $38,000 for one recipient, though both spouses must file Form 709 to make the election.16Internal Revenue Service. Gifts and Inheritances
A Warning if Medicaid Long-Term Care Is on the Horizon
If the donor may apply for Medicaid long-term care coverage within the next five years, gifting a vehicle can cause real trouble. Medicaid’s look-back period is 60 months. When someone applies for nursing home Medicaid or a Medicaid waiver, the state reviews every asset transfer made during the prior five years. A vehicle given away, or sold below fair market value, counts as a disqualifying transfer and triggers a penalty period of ineligibility for Medicaid long-term care benefits.17Centers for Medicare & Medicaid Services. Transfer of Assets in the Medicaid Program
The penalty length is calculated by dividing the vehicle’s fair market value by the average monthly cost of nursing home care in Alabama. A car worth $15,000 could translate to several months of ineligibility. The federal gift tax exclusion has no bearing here; the IRS and Medicaid operate under separate rules. A gift that costs nothing at the IRS can still trigger a full Medicaid penalty. If Medicaid is a realistic possibility, talk to an elder law attorney before signing the title.
Records to Keep After the Transfer
Both donor and recipient should keep copies of the signed title assignment, the gift bill of sale, and the odometer disclosure. The recipient’s new Alabama title arrives by mail, typically within two to six weeks. Hold onto the bill of sale permanently: it’s the proof that no money changed hands, which matters for tax purposes and could matter in any future Medicaid review.
The donor should also notify their insurance company that they no longer own the vehicle, or keep paying premiums on a car they’ve already given away.