Fuel Tax Breaks: Will Truckers Really Save Money?

Fuel-tax reductions and temporary federal relief for dyed diesel are offering some potential savings for truckers, but the benefits vary by state and operating pattern. Industry officials say uncertainty over federal rules, state exemptions and International Fuel Tax Agreement (IFTA) reporting is causing some carriers to continue purchasing regular diesel.

State tax savings vary

The amount a trucker saves depends on the tax reduction adopted in each state. For example, a 50-cent-per-gallon suspension would reduce the cost of a 100-gallon purchase by $50.

State fuel-tax changes do not necessarily apply to all commercial trucking operations. According to tax-service provider ATBS, many states that have relaxed restrictions on dyed diesel have limited the changes to agricultural or timber-harvesting operations.

“The state tax is gonna save truckers some money over the next few months,” Lade said. “The federal, we don’t know what’s going to happen with that because only Congress can waive the fuel tax.”

Federal dyed-diesel relief remains temporary

An executive order signed this month allows dyed diesel, commonly used in off-road applications such as farm equipment, to be used for highway travel through Dec. 31, 2026, while temporarily providing relief from certain federal reporting and record-keeping requirements.

The order directs the Treasury secretary to defer certain diesel fuel tax payment obligations and provide penalty relief where permitted by law. It also directs the Internal Revenue Service to announce that it will not impose a penalty when dyed diesel is sold for highway use or used on the highway during the relief period.

The federal diesel tax itself has not been eliminated. Additional guidance on how the rules will apply after the relief period remains unavailable, creating uncertainty for fuel sellers and trucking companies.

IFTA and operating-area concerns

Carriers considering dyed diesel must account for the states in which they operate and the reporting requirements associated with IFTA. The IFTA Procedures Manual requires licensees to retain the mileage and fuel records supporting a return for four years.

Some companies are choosing to avoid dyed diesel while the tax treatment remains unsettled. A trucking company in South Dakota reportedly continued purchasing regular fuel despite the temporary federal relief.

The impact of higher diesel prices also differs among carriers. Trucking companies may be able to recover part of the increase through fuel surcharges, while company drivers and other operators may have fewer options to offset the added expense.

Fuel costs remain a concern

Farmers, truckers and economists said the diesel-tax reductions would provide limited relief compared with the broader increase in fuel prices. Although freight conditions have improved, elevated fuel and operating costs continue to affect carriers across the industry.