Trump Signs Tax-Free Red Diesel Order For Highway Use

President Trump signed an executive order on October 5, 2026, letting truckers, farmers, and other qualifying highway users fill up with dyed diesel, the red-tinted fuel normally reserved for off-road equipment, without immediately paying the federal highway tax on it for a limited period.

Federal energy data shows national on-highway averages up one-third from January levels. Trump's order defers that tax on qualifying dyed diesel used in highway vehicles between October 5 and December 31, 2026, and tells the Treasury Department to explore ways to cancel the deferred bill entirely.

Diesel prices have climbed sharply in 2026 as Iran- and Ukraine-related supply disruptions pushed retail costs higher.

Case IH Quadtrac tractor

Dyed diesel has long been sold without the highway tax for tractors, generators, and construction equipment that never touch public roads. The new order temporarily eases that off-road limitation. It defers the federal tax on dyed diesel used in highway vehicles during the specified 2026 window, with eligibility and documentation rules to be set by the Treasury and the IRS rather than as a blanket right for every driver through next year.

"For many years, farm vehicles, construction equipment and other off-road vehicles have used what's known as red-dyed diesel," Trump said at the signing. "You know what that is? I don't know what the hell it is, but whatever it is, it is supposed to be very good."

North Dakota Gov. Kelly Armstrong pointed to the timing around harvest season. "Record-high diesel prices are squeezing our ag producers, and this is a meaningful and timely step we can take to provide temporary relief and help our farmers and ranchers through the harvest season," he said. American Farm Bureau President Zippy Duvall added that a federal tax waiver "would provide immediate cost relief for farmers, ranchers, and agricultural haulers that continue to rely on taxable clear diesel."

2024 Chevrolet Silverado EV Work Truck towing a John Deere tractor

The federal highway excise tax on diesel runs 24.4 cents per gallon, and state taxes average 35.5 cents on top of that. Waiving just the federal piece can save an owner-operator around $50 to $60 on a large highway fill-up.

A typical long-haul tractor with a 250-gallon tank now costs in the ballpark of $1,300 to fill at early October prices. That's several hundred dollars more than at the start of the year, but nowhere near the $1,600 implied by some early estimates. The White House has touted savings of up to $100 per fill under the order on its own terms, a level that becomes realistic on very large fills when the full 24.4-cent federal tax break applies.

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Several states have discussed additional steps on dyed diesel, often focused on off-road agricultural use or short-term emergency relief rather than broad highway tax holidays that match the federal move. Nebraska, for example, now lists a dyed diesel tax rate of 0.25 cents per gallon beginning October 1, 2026, while explaining that dyed fuel remains limited to exempt uses under state law.

Trump separately claimed the order "will also drive down the costs of all goods, including groceries," arguing that lower diesel costs can ease the overall cost of moving freight. The order instructs the IRS to spell out, within five days of signing, how it will avoid penalizing retailers and drivers who sell or use dyed diesel on highways during the deferral window. That guidance, along with any follow-on legislation on the deferred tax bill, will determine how quickly and widely pumps offer the red-tinted fuel for highway use.