OFFICE OF INVESTIGATIVE SERVICES
RICHARD H. AUSTIN BUILDING
4th FLOOR 430 W. ALLEGAN LANSING, MICHIGAN 48918
www.Michigan.gov/sos
(517) 335-0218
Vehicle Sales Tax Trade-in Credit – Frequently Asked Questions
October 18, 2023
1. How is the amount of sales tax credit determined for a trade-in on the purchase of a
motor vehicle?
Effective January 1, 2019, the trade-in credit towards sales tax for vehicles delivered on
or after January 1 is the price agreed to by the dealer and purchaser for the trade-in
vehicle not to exceed $5,000. This amount will increase by an additional $1,000 on
January 1
st
of each year. This process will continue until the trade-in credit exceeds
$14,000 (i.e., 2029). At that time, purchasers will receive sales tax credit for the full
amount (100%) of the trade-in vehicle towards their purchase of a vehicle as defined by
the Michigan Vehicle Code. See Revenue Administrative Bulletin 2022-17 for further
details.
2. How is the amount of sales tax credit determined for a trade-in on the purchase of a
recreational vehicle?
Effective January 1, 2018, the trade-in credit equals the full agreed-upon value of a
recreational vehicle (RV) used toward the purchase of an RV purchased from a dealer.
To qualify for a sales tax credit, a recreational vehicle must be traded-in towards the
purchase of another recreational vehicle as defined by the Michigan Vehicle Code. Those
include, but are not limited to a trailer coach, a fifth wheel, a pop-up camper, and a
motorhome. Like watercraft, owners receive 100% sales tax trade-in credit towards the
purchase of another recreational vehicle. See Revenue Administrative Bulletin 2022-17
for further details.
3. How do I reach Treasury for assistance with sales tax and trade-in questions?
Vehicle dealers with trade-in questions may contact Treasury’s Technical Services
Section at 517-636-4230, option 3 or via email at Treas[email protected].
4. Can my customer receive a credit of sales tax when they trade-in a vehicle towards
the lease of a vehicle?
No, the lease of a vehicle is subject to Michigan use tax, not sales tax. The sales tax
statutes for trade-in’s does not extend to leased vehicle transactions.
5. Has the amount of trade-in entered on line 10 of the RD-108 changed?
No, there are no changes to line 10. This amount does not change and the full amount the
dealer accepts for the trade-in is still entered on line 10 of the RD-108.
6. Can a motorcycle, moped, snowmobile, or off-road vehicle be taken as an eligible
trade-in on a vehicle purchase?
Yes, any vehicle meeting the Michigan Vehicle Code definition of a motor vehicle is
eligible for the trade-in credit.
7. Can a utility trailer be taken as an eligible trade-in on a vehicle purchase?
No. A utility trailer does not meet the Michigan Vehicle Code definition of a motor
vehicle and is not eligible for the trade-in credit.
8. Can valuables such as jewelry, coins, or other tangible items be taken as an eligible
trade-in on a vehicle purchase?
No. The sales tax trade-in laws only provide a credit towards sales tax on eligible motor
vehicles when the customer is purchasing a motor vehicle.
9. Can an electric bicycle, electric carriage, or a mobile home be taken as an eligible
trade-in on a vehicle purchase?
No. These items do not meet the Michigan Vehicle Code definition of a motor vehicle.
10. Can anything other than a recreational vehicle qualify as an eligible trade-in on the
purchase of a recreational vehicle?
No. Only recreational vehicles as defined by the Michigan Vehicle Code may be used as
an eligible trade-in for credit towards sales tax due.
11. Can watercraft be taken as an eligible trade-in on a vehicle purchase?
No. Watercraft may only be traded towards the purchase of another watercraft. In this
situation, the purchaser will receive 100% credit towards their purchase, just like
recreational vehicles.
12. Can a vehicle not owned by the purchaser be used as an eligible trade-in on a
purchase of a vehicle?
Yes. The trade-in credit applies when a vehicle dealer accepts a trade-in on a vehicle the
purchaser does not own. The dealer must receive the trade-in on a properly assigned title
from the owner of the trade-in vehicle.
13. Can more than one vehicle be used as a trade-in credit on the purchase of a vehicle?
No. Only one vehicle can be used toward the trade-in credit. If two or more vehicles are
traded in, the customer will only receive credit for one of the vehicles for sales tax
purposes.
14. Can the trade-in credit be applied when the purchaser is a non-resident?
This will be determined by calculating two outcomes for sales tax. The first will be based
on Michigan’s sales tax rate and trade-in laws. The second will be based on the
purchaser’s home state sales tax rate and trade-in laws. The Michigan dealer will collect
the lesser of the two sales tax calculations. Please see form 485 for further details.
