Cecily Zamora
In Michigan, a 6% sales tax is typically levied on the transfer of vehicle ownership. However, this tax does not apply to vehicle sales between immediate family members, including in-laws. If you are registering or titling a vehicle and claiming an exempt relationship, you may be asked to provide proof of that relationship, such as a marriage license or birth certificate. While no exemption form or application is necessary, it is important to note that Michigan tax is based on the assessed value of the vehicle, which may result in additional taxes if the vehicle is determined to be worth more than the purchase price.
| Characteristics | Values |
|---|---|
| Tax when buying a vehicle from a brother-in-law in Michigan | No tax is due if you purchase or acquire a vehicle from an immediate family member, which includes a brother-in-law |
| Tax rate on vehicle purchases in Michigan | 6% of the full purchase price or fair market value, whichever is greater |
| Documentation required when claiming an exempt relationship | Marriage licenses, birth certificates, and certified letters of guardianship issued by a court |
| Basis of tax calculation in Michigan | Trade-in or "assessed" value of the vehicle |
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![Road user and property taxes on selected motor vehicles 1973 by Robert W. Sherrer. 1973 [Leather Bound]](https://m.media-amazon.com/images/I/61IX47b4r9L._AC_UY218_.jpg)
What You'll Learn
Michigan's 6% sales tax
Michigan's sales tax is currently set at 6%. This applies to the total price of all taxable retail sales of tangible personal property to the final consumer. This includes parts or materials transferred to the customer. Sales of electricity, natural or artificial gas, and home heating fuels for residential use are taxed at a reduced rate of 4%. Telecommunications are taxed at 6% if they are intrastate, and interstate telecommunications are taxed unless they meet certain exemption criteria.
The 6% sales tax also applies to vehicles purchased or acquired from another person, in which case it is due on the full purchase price or the fair market value, whichever is greater. However, no tax is due if the vehicle is purchased or acquired from an immediate family member, which includes in-laws such as a brother-in-law.
Michigan's use tax, which applies to out-of-state businesses and rentals and leases, is also set at 6%.
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No tax for immediate family
In Michigan, a 6% sales tax is typically due on the purchase of a vehicle. However, this tax does not apply if the vehicle is purchased from an immediate family member. This includes relatives by blood or affinity to the first degree, such as a spouse, father-in-law, mother-in-law, brother-in-law, sister-in-law, son-in-law, daughter-in-law, stepparents, stepchildren, grandchildren, and more.
For example, if you buy a car from your brother-in-law in Michigan, you are exempt from paying the 6% sales tax. This exemption also applies to other immediate family members as defined by Michigan law.
When transferring the title of a vehicle purchased from an immediate family member, you do not need to provide any additional documentation regarding your relationship. Simply leave the price section blank on the necessary forms, and the Secretary of State will indicate that the sale is between family members, and no tax is due.
It is important to note that this exemption only applies to the sales tax on the vehicle itself. Other fees, such as plate transfer fees and registration fees, may still apply when purchasing a vehicle from a family member. These fees are set by state law and cannot be amended without legislative action.
In addition to vehicle sales, Michigan has also introduced laws that provide property tax uncapping relief for transfers of real property to immediate family members. This means that the taxable value of the property will not increase when transferred within the family, keeping property taxes lower for the next generation of owners.
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Tax based on assessed value
In Michigan, a 6% sales tax is typically due on the purchase of a vehicle. However, this tax does not apply if the vehicle is purchased from an immediate family member, which includes a brother-in-law. So, if you buy a vehicle from your brother-in-law in Michigan, you will not have to pay the 6% sales tax.
Now, let's discuss property tax assessments in Michigan, which are based on a home's taxable value. While a home's assessed value does not directly impact its taxable value, there are situations where assessed value comes into play. For instance, after a home sale, the taxable value is uncapped and reset to the assessed value. While the assessed value can increase significantly with market trends, the taxable value is capped and can only increase annually by 5% or the rate of inflation, whichever is lower.
The assessed value of a home in Michigan is calculated by determining its estimated market value and then halving that amount. Local assessors use the "comparative sales" method to value a home, which involves comparing it to similar properties in the area. This estimated market value is then divided by two to arrive at the assessed value.
It's important to note that homeowners in Michigan have the right to appeal their property assessment. If successful, this appeal can result in a lower tax bill. However, the outcome of an appeal depends on various factors, and it may not always lead to a reduction in taxes.
In summary, while Michigan's tax laws regarding vehicle purchases from relatives like brothers-in-law are clear, the property tax system revolves around the concept of taxable value, which is influenced by assessed value calculations and can be subject to appeals by homeowners.
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No need for a letter
In Michigan, a 6% sales tax is due on the purchase or acquisition of a vehicle from another person. However, this tax is not collected if the vehicle is purchased or acquired from an immediate family member. Immediate family members include father-in-law, mother-in-law, brother-in-law, sister-in-law, son-in-law, daughter-in-law, grandchild-in-law, stepparents, step-siblings, and stepchildren.
When claiming an exemption from tax on a vehicle transferred between relatives, a transferee is not required to bring supporting documentation to the Secretary of State office. No exemption form or application is necessary, and no letter is required from the seller stating your relationship.
However, persons claiming an exempt relationship may occasionally receive a letter from the Department requesting proof of the exempt relationship. In such cases, documentation must be provided to avoid taxation. Accepted documents include marriage licenses, birth certificates, and certified letters of guardianship issued by a court.
It is important to note that Michigan tax is based on the trade-in or "assessed" value of the car, rather than the purchase price. This means that even if you only paid $10,000 for a car worth $19,800, you may be required to pay taxes on the higher assessed value.
In summary, while no letter is required to claim an exemption from sales tax when purchasing a vehicle from a brother-in-law in Michigan, it is important to be aware that the tax exemption is based on the relationship and the assessed value of the vehicle, and proof of the relationship may occasionally be requested by the Department.
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Exemptions for certain relatives
In Michigan, a 6% sales tax is levied on the storing, registering, or transferring of vehicle ownership. However, this tax is not collected when a vehicle is sold to an immediate family member.
Immediate family members include:
- Father-in-law
- Mother-in-law
- Brother-in-law
- Sister-in-law
- Son-in-law
- Daughter-in-law
- Grandchild-in-law
- Stepparent
- Stepbrother
- Stepsister
- Stepchild
If you are claiming an exempt relationship when registering or titling a vehicle, you may be asked by the Department to provide proof of the relationship. Acceptable documents include marriage licenses, birth certificates, and certified letters of guardianship issued by a court.
It is important to note that the tax exemption only applies to the transfer of vehicle ownership between immediate family members. If you are purchasing a vehicle from a non-family member and then transferring it to a family member, the tax must be paid at the time of your initial purchase.
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Frequently asked questions
Yes, Michigan exempts from use tax a transaction or portion of a transaction for the transfer or purchase of any taxable property between certain relatives, including a brother-in-law.
When claiming an exemption from tax on a vehicle, a transferee is not required to bring supporting documentation to the Secretary of State office. However, persons claiming an exempt relationship may receive a letter from the Department requesting proof of the exempt relationship, such as a marriage license, birth certificate, or certified letter of guardianship.
The tax amount is calculated at a rate of 6% of the retail dollar value at the time of acquisition as determined by the Department of Treasury. The tax is based on the trade-in or "assessed" value of the car to prevent people from selling cars for $1 and avoiding taxes.
