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Trump order opens highways to tax-free dyed diesel through Dec. 31

The order tells Treasury to defer the 24.4-cent federal diesel tax and waive penalties for on-road use of red-dyed fuel, if it finds the relief is legally authorized.

Motion Media News Staff

Oct 6, 2026

3 minutes

President Trump, seated at the Resolute Desk in the Oval Office, gestures while officials stand behind him beside a map on an easel.

Photo: The White House (Public domain), via Wikimedia Commons (source)

President Donald Trump on Monday, Oct. 5, signed an executive order meant to let drivers use tax-exempt, red-dyed diesel on highways for the rest of the year, with the federal tax on that fuel deferred, according to the text of the order.

Trump signed it on stage at a Nebraska rally for Sen. Pete Ricketts and Gov. Jim Pillen, both Republicans, The Hill reported. "I'm going to sign a historic executive order to officially waive the off-road requirement," Trump said, according to The Hill.

How it would work

Dyed diesel is normally sold untaxed for off-road uses such as farm and construction equipment, and the red color lets enforcement officers spot it in highway vehicles, the White House said in a fact sheet.

The order gives the Treasury secretary five days, consulting the secretary of war as appropriate, to determine whether federal tax law, specifically 26 U.S.C. 7508A, permits the relief and whether a qualifying event has taken place. If so, Treasury is to defer payment of the covered diesel taxes incurred from Oct. 5 through Dec. 31, without penalties or interest. Within the same five days, Treasury is to have the IRS announce that it will not penalize on-road sale or use of dyed diesel during that period.

The order also asks Treasury to look for ways, including legislation, to cancel the deferred amounts. It directs the Transportation and Agriculture departments to work with states, industry and farm groups on supply and safety.

Federal tax on highway diesel runs 24.4 cents per gallon, which comes to roughly $60 for a 250-gallon fill, the White House said in a release. It said savings would top $100 per fill in states that take matching action. The White House blamed high prices on tight global supply linked to the Russia-Ukraine war and limited refining capacity.

Reaction

Diesel averaged about $6.32 a gallon on Monday, according to AAA figures cited by The Hill. Gulf Oil's chief oil analyst, Tom Kloza, said in an interview with The Hill ahead of the signing that he did not expect more dyed diesel to move prices much. "This is really a cosmetic gesture," he said, calling it "a Band-Aid where a tourniquet would be more appropriate." He said the added fuel would not replace supply lost in the war.

What's next

Treasury's five-day deadline for its legal determination and the IRS penalty announcement falls on Saturday, Oct. 10. The order requires Treasury guidance spelling out who qualifies, any conditions and the date for paying deferred taxes. The federal order does not cover state fuel taxes; according to the fact sheet, it directs the White House's intergovernmental affairs office to press more states to adopt matching policies.