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Trump orders diesel fuel tax deferral, allows dyed diesel on highways

Trump orders diesel fuel tax deferral, allows dyed diesel on highways

Rule Changes

Executive order lets truckers and farmers use tax-exempt diesel through year's end; states warn the deferred taxes may still come due

October 18th, 2026: States warn drivers may owe diesel taxes later

Overview

Updated Oct 18

Truckers and farmers can burn tax-exempt "red dye" diesel on public highways through the end of the year under an executive order Trump signed October 5 in Grand Island, Nebraska. The order defers the 24.3-cent-per-gallon federal excise tax on that fuel through December 31, with no interest or penalties.

The five-day window for Treasury Secretary Scott Bessent to declare the deferral ended October 10 with no guidance published. A week later, NPR reported states are warning drivers they may owe the taxes later, since the order defers them rather than forgiving them. Diesel stayed near records at $6.28 a gallon on October 11, after Trump announced a deal for Russia to ship diesel to U.S. markets under a six-month sanctions waiver.

Why it matters

If the deferred diesel taxes are forgiven, the Highway Trust Fund loses revenue that pays for road construction and transit nationwide.

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Key Indicators

$6.28/gal
National diesel price
AAA average on October 11, below the September 22 peak of $6.53 that AAA data reported.
~60¢
Potential per-gallon savings
Combined federal (24.3 cents) and average state (35 cents) diesel tax avoided where states also waive restrictions, per NPR.
300,000
Metric tons in first Russian diesel shipment
Trump said Russia would ship 300,000 metric tons immediately, about 14 hours of U.S. distillate demand, with 500,000 tons in November.

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People Involved

Donald Trump
Donald Trump
President of the United States
Signed the executive order October 5, 2026
 Brooke L. Rollins
Brooke L. Rollins
U.S. Secretary of Agriculture
Issued a statement supporting the order on the day of signing
 Scott Bessent
Scott Bessent
U.S. Secretary of the Treasury
Five-day window to declare the diesel tax deferral expired October 10; no determination or IRS penalty waiver announced as of October 18
 Vladimir Putin
Vladimir Putin
President of Russia
Agreed with Trump on October 9 to supply diesel to U.S. and global markets under a six-month sanctions waiver

Organizations Involved

U.S. Department of the Treasury
U.S. Department of the Treasury
Federal agency
Deadline to issue the diesel-tax determination passed October 10; implementing guidance not yet published as of October 18

The order directs Treasury to determine whether Section 7508A relief applies and to defer the diesel excise tax for the covered period without penalties.
Internal Revenue Service
Internal Revenue Service
Federal tax agency
Directed to waive dyed-diesel highway penalties through year's end

The order instructs the IRS to announce it will not impose penalties when dyed diesel is sold for use or used on the highway during the relief period.
American Soybean Association
American Soybean Association
Industry Association
Urged administration to ensure farmers are held harmless for deferred taxes

The national trade group for U.S. soybean farmers.

Timeline

10 events Latest: October 18th, 2026 · 3 weeks ago
Tap a bar to jump to that date

  1. States warn drivers may owe diesel taxes later

    Latest Statement

    NPR reported states are warning that drivers using dyed diesel on highways may owe the deferred taxes later, since the order defers the federal excise tax rather than forgiving it.

  2. Diesel price holds near record as Russian shipments start

    Market

    AAA's national average was $6.277 a gallon, essentially unchanged from October 8. The first announced Russian cargo, 300,000 metric tons, equals roughly 14 hours of U.S. distillate use.

  3. Treasury deadline passes without diesel-tax decision

    Policy

    The executive order's five-day window ended with no published Treasury determination, IRS penalty waiver, or payment date as of October 11.

  4. Executive order published in Federal Register

    Policy

    The order directing diesel excise tax deferral and dyed-diesel penalty relief was formally published, starting a five-day clock for Treasury decisions.

  5. Trump announces Russian diesel supply deal

    Policy

    Trump said Russia would immediately supply 300,000 metric tons of diesel to American and global markets, with 500,000 tons in November, tied to a six-month sanctions waiver.

  6. Diesel price hits $6.30 a gallon

    Market

    AAA's national average reached $6.30 a gallon October 7, more than 70% above a year earlier. AAA data reported by Time put the September 22 peak at $6.53, so the October reading stayed below that record.

  7. American Soybean Association urges certainty for farmers

    Statement

    The group asked the administration to ensure farmers do not have to pay deferred taxes for fuel use and are held harmless for residual dyed diesel in tanks after the order expires. It also warned that reduced highway fuel-tax collections could affect road funding.

  8. Trump signs diesel fuel tax relief order

    Policy

    Executive order defers diesel excise tax payments and waives dyed-diesel highway penalties through December 31.

  9. USDA issues statement on the order

    Statement

    Agriculture Secretary Rollins cites $640 million in estimated federal and state savings across 224.6 million acres.

  10. States issue their own dyed diesel waivers

    Policy

    Nebraska, Texas, North Carolina and Georgia have granted waivers allowing dyed diesel on highways, according to GasBuddy analyst Patrick De Haan.

Scenarios

1

White House extends diesel tax relief into 2027

Possible Resolves by Jan 15, 2027

Discussed by: Analysts cited by Bloomberg Law and USA Today

If diesel prices stay elevated, the administration extends the deferral or issues a new order covering 2027. The current order's Section 4 already asks Treasury to explore forgiving the deferred taxes, which would ultimately require Congress.

2

Congress cancels deferred diesel tax bills

Unlikely Resolves by Q2 2027

Discussed by: Section 4 of the executive order itself

The order directs Treasury to explore legislation eliminating the obligation to pay the deferred taxes. Passing such a law would need a congressional majority and would permanently shift the revenue out of the Highway Trust Fund.

3

Relief expires, deferred diesel taxes come due

Likely Resolves by Q1 2027

Discussed by: USA Today reporting that experts see limited price impact

The relief window closes December 31. Taxpayers who used dyed diesel on highways during the period would then owe the deferred federal excise tax unless the IRS or Congress acts first.

4

State patchwork limits dyed diesel use

Possible Resolves by End of 2026

Discussed by: Patrick De Haan of GasBuddy (via CBS News)

If states don't waive their bans on dyed diesel on highways, truckers crossing state lines could face penalties, limiting the order's benefit. Nebraska, Texas, North Carolina and Georgia have issued waivers so far.

5

Russian diesel shipments cut pump prices

Possible Resolves by Nov 30, 2026

Discussed by: FinanceFeeds market analysts

Trump's October 9 deal commits Russia to ship 300,000 metric tons immediately and 500,000 tons in November. The first cargo equals about 14 hours of U.S. distillate demand, so prices would need sustained volumes to move. AAA showed $6.277 a gallon on October 11, essentially unchanged.

6

Treasury declines to declare diesel tax deferral

Unlikely Resolves by End of 2026

Discussed by: EY Tax News, tax policy analysts

The order requires Treasury Secretary Bessent to find a qualifying event under 26 U.S.C. 7508A, a disaster-relief statute, before deferring the excise tax. If he decides no qualifying event exists, the deferral and penalty waiver would not take effect. No determination had been published as of October 11.

Historical Context

2 moments from history that rhyme with this story — and how they unfolded.

October 2012

Hurricane Sandy tax deadline waivers (2012)

After Hurricane Sandy hit the Northeast, the IRS postponed tax filing and payment deadlines for affected areas under Section 7508A, the same disaster-relief statute the October 2026 order invokes.

Then

Affected taxpayers got extra time to file and pay without penalties.

Now

Section 7508A became the standard mechanism for federal tax relief after declared disasters.

Why this matters now

The 2026 order uses a disaster-relief statute for an economic reason, high fuel prices, rather than a natural disaster, which is a notable departure from how the authority has typically been applied.

July 2008

2008 diesel price spike

U.S. diesel prices topped about $4.75 a gallon, the highest on record at the time, prompting calls in Congress for suspending federal fuel taxes. Prices fell sharply within months as crude oil dropped.

Then

Temporary political pressure for fuel-tax relief faded as prices fell.

Now

The federal diesel excise tax stayed in place.

Why this matters now

It shows temporary fuel-tax relief tends to lose momentum once prices drop, a dynamic that will shape whether the 2026 deferral is extended or forgiven.

Sources

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whitehouse.gov USA Today USDA Bloomberg Law Truck News Fox Business Anadolu Agency Pubt.io FilingExplorer CBS News ABC News DTN Progressive Farmer NBC News Time Farm Progress Overdrive Los Angeles Times PBS NewsHour NPR Transport Topics Morning Ag Clips EY Tax News Federal Register The Edge Singapore The Money Overview MITechNews Jingletree FinanceFeeds Iran Times of News whitehouse.gov whitehouse.gov NPR