Regan Brown
Diesel fuel is taxed differently depending on the region and the type of diesel being used. In the United States, the federal excise tax on diesel fuel is 24.4 cents per gallon, while state and local taxes add an average of 35.89 cents, for a total US volume-weighted average fuel tax of 60.29 cents per gallon for diesel. Some states have higher diesel tax rates than others, with Pennsylvania having the highest at $0.741 per gallon. Additionally, certain types of diesel fuel, such as biodiesel and Dyed Diesel, may have different tax treatments. For example, Dyed Diesel is not subject to excise taxes unless it is used on highways. The taxation of diesel fuel is an important source of revenue for transportation infrastructure and other government programs. However, there are debates about the effectiveness of diesel taxes in encouraging reduced consumption and the need to increase taxes to meet infrastructure demands.
| Characteristics | Values |
|---|---|
| Federal excise tax on diesel fuel | 24.4 cents per gallon |
| Federal excise tax on gasoline | 18.4 cents per gallon |
| Average state and local taxes and fees on diesel | 35.89 cents |
| Average state and local taxes and fees on gasoline | 34.24 cents |
| Total US volume-weighted average fuel tax on diesel | 60.29 cents per gallon |
| Total US volume-weighted average fuel tax on gasoline | 52.64 cents per gallon |
| Highest tax rate on diesel | $0.741 / gallon (Pennsylvania) |
| Lowest tax rate on diesel | $0.0895 / gallon (Alaska) |
| Average state and local motor fuel tax revenue in 2021 | $53 billion |
| Kerosene used in aviation (Jet fuel) tax rate | $0.244 per gallon |
| Kerosene tax rate when removed directly from an on-airport terminal | $0.219 |
| Dyed Diesel tax rate | Exempt from Excise Taxes unless used on highways |
| Biodiesel, waste vegetable oil, and straight vegetable oil tax rate | Same rate as diesel fuel |
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What You'll Learn
Diesel fuel tax rates in the US
The United States federal excise tax on diesel fuel is 24.4 cents per gallon. This includes an excise tax of 18.3 or 18.4 cents per gallon and a Leaking Underground Storage Tank (LUST) Fund fee of 0.1 cents per gallon. However, federal diesel tax rates have remained unchanged since 1993 and are not indexed to inflation, which increased by about 111% from 1993 to 2023. As a result, there have been calls for an increase in the diesel tax rate to offset the loss of purchasing power. The National Surface Transportation Infrastructure Financing Commission, for instance, recommended a 15-cent increase in the diesel tax in a 2009 report.
On top of the federal excise tax, state and local taxes and fees further increase the total tax burden on diesel fuel. As of April 2019, these additional taxes and fees averaged 35.89 cents per gallon, resulting in a total US volume-weighted average fuel tax of 60.29 cents per gallon for diesel. However, diesel tax rates vary across states. For instance, in July 2024, California had the highest diesel tax rate of $0.9212/gal, while Alaska had the lowest at $0.0895/gal.
In addition to diesel fuel, the United States also taxes jet fuel, biodiesel, and waste vegetable oil at similar rates. Kerosene used for aviation fuel, also known as jet fuel, is generally taxed at $0.244 per gallon. However, a reduced rate of $0.219 applies under certain conditions, such as when the kerosene is loaded directly into an aircraft from a qualified refueller truck on airport property.
Dyed Diesel, which is typically used for non-highway purposes, is exempt from excise taxes unless used on highways. Biodiesel, waste vegetable oil, and straight vegetable oil are taxed at the same rate as diesel fuel.
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State and local diesel fuel taxes
In the United States, both the federal government and individual states levy excise taxes on diesel fuel to maintain roads and highways. As of April 2019, the US federal excise tax on diesel fuel is 24.4 cents per gallon, with state and local taxes adding an average of 35.89 cents, for a total US volume-weighted average fuel tax of 60.29 cents per gallon for diesel.
State and local motor fuel tax rates vary across the country. In 2021, state and local governments collected a combined $53 billion in revenue from motor fuel taxes. While most states levy per-unit taxes based on the number of gallons purchased, 22 states and the District of Columbia tie at least a portion of their motor fuel tax rate to variables such as the price of gasoline, inflation, or state population growth. As of 2016, 19 states and the District of Columbia had fuel taxes with rates that vary alongside changes in the price of fuel, the inflation rate, vehicle fuel economy, or other factors.
The first US state to tax fuel was Oregon, which introduced a 1-cent per gallon tax on February 25, 1919. In the following decade, all of the US states (48 at the time), along with the District of Columbia, introduced a gasoline tax. By 1939, many states levied an average fuel tax of 3.8 cents per gallon. In the years since, state fuel taxes have undergone many revisions.
Five states charge sales tax on diesel fuel, which is calculated as a percentage of the fuel purchase and varies based on the price of fuel. Ten states levy a general sales tax or gross receipts tax on purchases of motor fuel. In California, the general sales tax is included in the state's per-gallon excise tax rate, while the other nine states levy it as a separate tax on the purchase. State tax rates on diesel fuel vary; they are the same as the tax rates on gasoline in 24 states and the District of Columbia, higher in 19 states, and lower in six states.
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Federal diesel fuel tax
In the United States, the federal excise tax on diesel fuel is 24.4 cents per gallon, which is higher than the federal excise tax on gasoline, which is 18.4 cents per gallon. The federal tax on diesel fuel was last raised on October 1, 1993, and it has remained unchanged since then. This means that the tax is not indexed to inflation, which increased by 111% from October 1993 to December 2023.
The proceeds from the federal excise tax on diesel fuel partly support the Highway Trust Fund, which funds highway and bridge construction and maintenance. In Fiscal Year 2016, federal fuel taxes raised $36.4 billion, with $10.3 billion coming from diesel and special motor fuel taxes.
In addition to the federal excise tax, state and local taxes and fees also apply to diesel fuel. As of April 2019, these taxes and fees added an average of 35.89 cents to diesel fuel, resulting in a total US volume-weighted average fuel tax of 60.29 cents per gallon for diesel.
It is worth noting that the tax rates for diesel fuel can vary depending on the state and local regulations. Some states may have exemptions or reduced rates for certain types of diesel fuel, such as dyed diesel or biodiesel. Additionally, aviation fuel, such as kerosene, is generally taxed at a different rate than diesel fuel used in vehicles.
Overall, the federal diesel fuel tax in the United States is a significant source of revenue for the government, contributing to the funding of transportation infrastructure and other government programs. While there have been proposals to increase the tax to account for inflation and changing infrastructure needs, the federal diesel fuel tax rate has remained unchanged since 1993.
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Tax on jet fuel
Jet fuel, also known as kerosene, is taxed differently depending on the type of operation (commercial or non-commercial) and the type of fuel used. Private jet fuel is taxed at 21.9 cents per gallon, including the Leaking Underground Storage Tank (LUST) tax, while aviation gasoline (Avgas) is taxed at 19.4 cents per gallon, also including the LUST tax. For non-commercial aviation, the tax rate is $0.219 per gallon if the kerosene is loaded directly into the aircraft fuel tank from an on-airport terminal or a qualified refueler truck, tanker, or tank wagon.
Small aircraft that use less fuel pay lower taxes, while larger aircraft that consume more fuel pay higher taxes. Fuel taxes incentivize the use of newer, cleaner, quieter, and more fuel-efficient aircraft, as well as discourage the use of congested airports, which require more fuel due to increased taxi and air time. These taxes contribute to funding for aviation infrastructure, environmental protection programs like the LUST fund, and the Federal Aviation Administration (FAA).
There are exemptions from the federal excise tax on aviation fuel for specific users and operations. Foreign trade operations, or flights transporting passengers or goods between the US and another country, are exempt. Commercial airlines are also exempt from paying aviation fuel excise taxes. Additionally, state or local government aircraft operations are tax-exempt, and agricultural applicators in Colorado can claim a refund of up to 50% of excise taxes for fuel used in state-licensed agricultural aircraft.
The Sustainable Aviation Fuel (SAF) credit, introduced under the Inflation Reduction Act of 2022, is another notable exemption. This credit is applicable to fuel mixtures containing SAF sold or used between December 31, 2022, and January 1, 2025, and offers $1.25 per gallon of SAF in a qualifying mixture, with the possibility of a supplemental credit for higher reductions in greenhouse gas emissions.
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Tax on biodiesel
In the United States, biodiesel, waste vegetable oil (WVO), and straight vegetable oil (SVO) are taxed at the same rate as diesel fuel. As of April 2019, the US volume-weighted average fuel tax for diesel was 60.29 cents per gallon.
Dyed Diesel, which is diesel fuel with a red dye added, is not subject to excise taxes unless it is used on highways. When used off-road, it is taxed at the combined statewide sales tax rate, plus applicable district taxes. A partial exemption certificate must be provided for this rate to apply.
A biodiesel blender that is registered with the Internal Revenue Service (IRS) may be eligible for a tax incentive of $1.00 per gallon of pure biodiesel blended with petroleum diesel to produce a mixture containing at least 0.1% diesel fuel. This incentive was originally set to expire on December 31, 2022, but has been extended through December 31, 2024. To be eligible for the tax credit, blenders must have produced and sold or used the qualified biodiesel mixture as a fuel in their trade or business. The incentive must first be taken as a credit against the blender's fuel tax liability, and any excess can be claimed as a direct payment from the IRS. Claims must include a copy of the certificate from the registered biodiesel producer or importer that identifies the product and specifies its biodiesel content.
Additionally, a taxpayer who delivers pure, unblended biodiesel (B100) into the tank of a vehicle or uses B100 as an on-road fuel in their trade or business may be eligible for an incentive of $1.00 per gallon of biodiesel. If the biodiesel was sold at retail, only the person who sold the fuel and placed it into the vehicle's tank is eligible for the tax credit. Similar to the blender incentive, the incentive is allowed as a credit against the taxpayer's income tax liability, and a certificate from the registered biodiesel producer or importer must be included with any claims.
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Frequently asked questions
The federal excise tax on diesel fuel in the US is 24.4 cents per gallon.
No, all states tax diesel fuel, but the rates vary.
The lowest tax rate on diesel fuel is in Alaska at $0.0895 / gallon.
Dyed Diesel is a type of diesel fuel that is not subject to Excise Taxes unless used on highways. It is typically used for agricultural purposes and is taxed at a lower rate when used off-road.
In 2021, state and local governments collected a combined $53 billion in revenue from motor fuel taxes, which accounted for 1.3% of general revenue.
