Michigan residents buying a car, recreational vehicle or boat will see a tax break if they trade in an older model under legislation signed and celebrated Wednesday (Nov. 6) by Gov. Rick Snyder.
The new law, years in the making, will exempt the value of a trade-in from the taxable purchase price of a new car, boat or RV.
Supporters say Michigan was one of just six states — and the only in the Great Lakes region — that applied its 6% sales tax to the full sale price even if the transaction included a trade in, which put local dealerships at a competitive disadvantage.
Michigan boat buyers will be able realize full savings beginning Nov. 15, but the tax break on cars and RVs will start in December and be phased in slowly.
A car or RV buyer will initially be able to exempt a trade-in value of up to $2,000 from the sales tax. The maximum trade-in value would increase by $500 annually over the course of the next 25 years.
A customer who buys a car this year could save up to $120 with a trade-in. The maximum tax break will increase by $30 each year beginning in 2015.