Exemption Amount to be Phased-In Over Twenty-Six Years
Public Act 159 of 2013 and Public Act 160 of 2013, both essentially the same and both effective November 6, 2013 enact a trade-in allowance deduction on the purchase of a motor vehicle or recreational vehicle. The agreed-upon value of a motor vehicle or recreational vehicle used as part payment of the purchase price of a new or used motor vehicle or a new or used recreational vehicle is excluded from the tax base for purposes of Michigan Sales Tax.
The agreed-upon value of the trade-in vehicle must be separately stated on the invoice or other similar document given to the purchaser.
The deduction is phased in as follows:
Beginning December 15, 2013, the maximum trade-in value is limited to $2,000.
Beginning January 1, 2015, and each January thereafter, the allowable trade-in value increases by $500 unless Section 105D of the Social Welfare Act is repealed.
Beginning January 1 of the year in which the trade-in value exceeds $14,000, there will no longer be a limit on the agreed-upon value of the trade-in vehicle.
In addition, beginning November 15, 2013, credit for the agreed-upon value of a titled watercraft used as part payment of the purchase price of a new or used watercraft is excluded from the tax base so long as the agreed-upon value is separately stated on the invoice or bill of sale.