Michigan and New Jersey Join States Raising Gasoline Tax

2026 state gasoline tax changes: what changed on January 1, 2026, and why it matters

Several states changed their per-gallon gasoline (and diesel) excise taxes effective January 1, 2026. Most of the movement came from automatic inflation indexing written into state law. A few changes came from new legislation.

A state gasoline excise tax is a set charge per gallon, collected through the fuel supply chain. It is different from:

• Sales tax, which is a percentage of the retail price and can rise or fall with pump prices
• Local fees and surcharges, which can vary by county or city
• Federal fuel taxes, which are separate from state taxes

Even when you do not see a tax line on the receipt, excise taxes are typically embedded in the posted price. Many states update rates on January 1 or July 1. Those dates match statutory adjustment schedules and state budget cycles.

Who feels this most: daily commuters, cross-border drivers, gig workers, small businesses, fleets, and fuel retailers. Immigrants and visa holders often fall into these groups. Think new arrivals driving to multiple jobs, or families commuting between states for work and school.

📅 Effective-date alert: Most 2026 rate changes took effect January 1, 2026. Oregon’s planned increase was paused pending a November 2026 vote.

Before/After: 2026 gasoline tax changes at a glance

The table below highlights the headline changes discussed in this guide. (Other state changes are discussed later in categories.)

Michigan: biggest increase, and why “constitutional dedication” matters

Michigan’s January 1, 2026 increase stands out because it is large and mechanical.

How the Michigan rate is set. Michigan uses a structure that combines:

• A base rate set by statute, and
• An inflation adjustment tied to the U.S. CPI for urban consumers, based on a defined measurement period
• A rounding rule that can push the final number up

Indexing can create big year-to-year moves when lawmakers reset the base rate. That is what happened here.

Legal authority. Michigan’s change was enacted through Public Act 20 of 2025, signed by Gov. Gretchen Whitmer. The law increased the base rate and applied an inflation factor. The adjustment method is set out in state law.

Constitutional dedication. Michigan is also notable because fuel-tax revenue is constitutionally dedicated. that means the money is restricted for transportation purposes. It cannot be redirected as easily for unrelated spending.

That restriction can matter for public trust. It can also affect future politics. Dedicated revenue streams often make rate changes easier to defend.

Practical impact example. If you buy 15 gallons each week, even a moderate per-gallon change adds up over a year. If you drive for work, it can flow into pricing, mileage reimbursements, or bids.

For immigrants on work visas who drive for income—rideshare, delivery, home health visits—the change is most noticeable when fuel is a direct business input.

New Jersey: PPGRT adjustments, the Highway Fuel Cap, and why gallons sold matter

New Jersey’s fuel taxes are often discussed as “the gas tax,” but they are built from pieces. The key moving part in 2026 is the Petroleum Products Gross Receipts Tax (PPGRT).

What PPGRT is. PPGRT is a tax on petroleum products that is converted into a cents-per-gallon rate for motor fuels. It sits alongside New Jersey’s fixed per-gallon motor fuels tax. Together, they create the overall gasoline tax burden.

Why it changes. New Jersey adjusts the PPGRT to meet a revenue target under the Highway Fuel Cap concept. When fuel consumption drops, a state may raise the per-gallon rate to collect similar revenue from fewer gallons.

Declining consumption can happen for ordinary reasons:

• Better fuel economy
• More hybrid and electric vehicles
• Remote work patterns
• Economic slowdowns that reduce driving

Diesel can move differently than gasoline. New Jersey’s diesel rate change differs from gasoline. That matters for trucking, fleets, and small businesses that run diesel vans or box trucks.

If you are a treaty-based nonresident in some contexts, state gasoline taxes still affect your costs. They are not federal income taxes. They are a business input you budget for.

Other notable state changes (small changes, real money)

Outside Michigan and New Jersey, many 2026 changes were modest. Most were driven by CPI-indexed formulas. Indexing typically creates smaller annual moves, because the rate is nudged rather than reset.

States with small increases included Georgia, Minnesota, and North Carolina. These were around a cent or less.

States with small decreases included New York, Utah, and Vermont. Utah was singled out as a reduction state.

Florida’s state motor fuel tax moved to 22.0 cents per gallon.

Even small per-gallon changes accumulate quickly for high-mileage drivers. A fleet that burns thousands of gallons monthly will feel it more than a casual driver.

⚠️ Warning: Commuting fuel is a personal expense for federal tax purposes. Most workers cannot deduct it on a Form 1040. Business owners may deduct fuel as a business expense.

For federal tax context (tax year 2026, filed in 2027), the IRS rules that matter are usually about recordkeeping and business deductions, not “claiming a gasoline tax.” Start with IRS Publication 463 (Travel, Gift, and Car Expenses): IRS Publication 463 and the IRS forms portal: IRS forms and publications

No change and paused hikes: when automatic mechanisms don’t move

Some states showed no change even though they have mechanisms that can adjust rates. That can happen when:

• The formula produces a minimal change that rounds away
• A cap limits increases
• Policymakers override an automatic increase

Oregon’s pause is the clearest transition rule in 2026. Oregon approved a 6-cent hike (from 40 to 46 cents per gallon) and then a petition effort gathered enough signatures to send the increase to voters. The rate increase is paused until the November 2026 election.

“Paused” creates planning problems:

• Fuel retailers must manage pricing and customer expectations
• Fleets writing multi-month contracts must decide whether to add fuel-surcharge language
• Households budgeting for commuting should watch the election outcome

Funding purposes and timing: why January 1 (and sometimes July 1) is common

Fuel taxes fund transportation in most states. The pressures are straightforward:

• Road and bridge maintenance costs rise with construction inflation
• Vehicles are more efficient, so gallons sold may fall
• States try to keep long-term capital plans funded

Michigan’s constitutional dedication is one model. Other states use earmarked funds with more flexibility. New Jersey’s approach ties a variable rate to a revenue target. That supports multi-year transportation spending plans.

Timing matters for businesses because contracts, reimbursements, and budgets often reset at the start of a year. July 1 changes can also hit during summer travel and peak freight season.

For immigrant-owned small businesses, a mid-year fuel-tax change can affect cash flow quickly. It can also change whether a delivery route stays profitable.

Context: using 2025 as a baseline, and why pump prices won’t match tax changes

Comparing 2026 rates to 2025 helps you judge the size of a change. Still, pump prices rarely move one-for-one with fuel taxes.

Retail prices reflect many layers:

• Crude oil prices
• Refining margins
• Distribution and retail markups
• State and local taxes and fees

To verify current rates, check state department of revenue or treasury notices. For federal tax treatment of car and truck expenses, the IRS starting points are IRS Publication 463 and, for residency basics that affect filing, IRS Publication 519 (U.S. Tax Guide for Aliens): IRS Publication 519 (PDF)

Recommended actions and timeline (2026 planning, 2027 filing)

1. Track fuel costs starting January 1, 2026, especially if you are self-employed or run a fleet. Keep receipts and mileage logs.
2. Update pricing or fuel-surcharge clauses for Michigan and New Jersey routes in 2026 contracts.
3. Watch Oregon’s November 2026 election if you operate there. Build a contingency for either outcome.
4. For tax year 2026 (returns filed in 2027), claim business vehicle costs only with clean records. Use IRS guidance in Publication 463 and keep documentation that supports your method.

⚠️ Disclaimer: This article is for informational purposes only and does not constitute tax, legal, or financial advice. Tax situations vary based on individual circumstances. Consult a qualified tax professional or CPA for guidance specific to your situation.