Traverse City Record-Eagle

Business

October 23, 2013

Michigan vehicle buyers will get a tax break

LANSING, Mich. (AP) — Buying a new car? You might want to wait until Dec. 15.

Starting then, you will pay less in sales tax on a car purchase in Michigan because the value of your trade-in can be counted under a deal between lawmakers and Gov. Rick Snyder.

The Legislature began giving final approval to the gradual tax cut Tuesday, and the governor is expected to sign it after the effort had stalled for decades in Lansing.

In the first year, people will no longer pay Michigan's 6 percent sales tax on up to $2,000 of the value of their trade-in, for a savings of up to $120.

The trade-in value subtracted from the sales price will rise $500 a year, which equals an extra $30 tax break per year until it is fully phased in 25 years from now.

Legislators expect most car buyers to be able to credit the full value of their trade-in against the purchase price within six years. Boat buyers can immediately subtract the full value of their trade-in starting Dec. 15.

Michigan is among just six states to make car buyers pay sales tax on the full price without counting their trade-in, according to the Michigan Auto Dealers Association, which has pushed the legislation for years as a way to jumpstart sales. Critics say the existing law is a form of double taxation because buyers previously paid full sales tax on the vehicle they are trading in.

"I'm excited because we're giving something back to the average consumer," said Senate Majority Leader Randy Richardville, R-Monroe. "We're telling people that financially we're in good shape and we're going to share that wealth so to speak a little bit with the people who put the tax money here in Lansing to begin with."

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