Michigan has long been recognized as the heart of the American Automotive Industry due to its hand in the mass production of vehicles throughout the 20^th and 21^st century. Although Michigan has been a titan in the industry, the state has never been lenient with sales taxes on new vehicles purchases.

In most states, consumers would only have to pay the sales tax on the difference between any trade-in vehicle and the new vehicle; Michigan laws required customers to pay tax on the full value of the purchased vehicle. It wasn’t until 2013 that Michigan laws began to change in favor of the consumer, offering a partial tax credit to its residents. 

When the law originally passed in 2013, it stated that the tax credit will be applied to the first $2,000 of the value of the trade-in. The law had a plan set in place to gradually increase the tax credit amount by $500 per year starting in 2015, until it reaches a maximum of $14,000, which was set to happen in the year 2039.

Last year, Senate bills 94 and 95 increased the current tax credit amount on January 1st, 2019 from $4,000 to $5,000 and it is set to increase by $1,000 per year on January 1st until the maximum of $14,000 is reached (2029). The bill states that, once the maximum amount has been reached, “there shall be no limitation on the agreed- upon value of the motor vehicle used as part payment.”

Governor Rick Snyder attempted to veto the bill wanting to prevent the tax credit increase, but the state legislature overrode the veto, allowing the bill to pass. Senate Leader Jim Ananich, said that the veto override vote, “sends a strong message that we can’t just continue to balance the state’s budget on the back of regular folks”.

For more information on the Michigan Trade Sales Tax Credit please visit https://www.michigan.gov/documents/sos/PA_159__160_2013_FAQ_442206_7.pdf