Michigan Gas Tax 2026: Complete Guide to the 52.4¢ Per Gallon Increase

Michigan Gas Tax 2026: Complete Guide to the 52.4¢ Per Gallon Increase

On January 1, 2026, Michigan implemented one of the most significant fuel tax increases in its history, raising the gas tax from 31.0¢ to 52.4¢ per gallon—a 69% increase. This comprehensive guide explains everything you need to know about these changes, how they affect you, and what to expect in the coming years.

Quick Summary

• New tax rate: 52.4¢ per gallon (both gas and diesel)
• Previous rate: 31.0¢ per gallon
• Increase: 21.4¢ per gallon (69% higher)
• Effective date: January 1, 2026
• Good news: 6% sales tax on fuel eliminated
• Annual adjustments: Tax rate will increase with inflation (max 5% per year)

Table of Contents

1. What Changed on January 1, 2026
2. The Full Legislative Package
3. How This Affects Michigan Drivers
4. Sales Tax Elimination: The Silver Lining
5. Special Inventory Tax for Businesses
6. Annual Inflation Adjustments
7. How Michigan Compares to Other States
8. Revenue and Infrastructure Plans
9. Who's Most Affected
10. Planning for Higher Fuel Costs
11. Frequently Asked Questions

What Changed on January 1, 2026 {#what-changed}

The New Fuel Tax Rate

Effective January 1, 2026, Michigan's motor fuel tax increased dramatically:

Old Rate (2025):

• Gasoline: 31.0¢ per gallon
• Diesel: 31.0¢ per gallon

New Rate (2026):

• Gasoline: 52.4¢ per gallon
• Diesel: 52.4¢ per gallon

The 52.4¢ rate consists of:

• Base rate: 51.0¢ per gallon
• Inflation adjustment: 1.4¢ per gallon (2.7% adjustment for 2026)

Three Major Changes

1. Fuel Tax Increase: +21.4¢ per gallon on all motor fuel
2. Sales Tax Elimination: 6% sales tax on fuel purchases removed
3. Annual Inflation Adjustments: Tax rate will increase each year based on CPI

The Full Legislative Package {#legislation}

House Bill 4183 and Related Acts

The fuel tax changes came through Michigan House Bill No. 4183, which was part of a larger package of four bills:

• HB 4180: Made related changes to tax collection procedures
• HB 4181: Updated compliance and enforcement provisions
• HB 4182: Modified reporting requirements
• HB 4183: The main bill establishing the new rates

All four bills were enacted as Public Acts 17-20 of 2025, signed into law on October 7, 2025, and took effect on the same date with implementation beginning January 1, 2026.

Constitutional Restrictions

Michigan's Constitution restricts how fuel tax revenue can be used:

"Fuel tax revenue must be used exclusively for transportation purposes, including road construction, maintenance, repair, and public transit."

This means the increased revenue cannot be diverted to other state programs like education or healthcare.

How This Affects Michigan Drivers {#driver-impact}

Annual Cost Increase

The average Michigan driver will pay significantly more in fuel taxes in 2026. Here's the breakdown:

Typical Michigan Driver:

• Annual mileage: 14,000 miles
• Average MPG: 25
• Annual fuel consumption: 560 gallons

Additional Annual Cost: 560 gallons × $0.214 = $119.84 more per year

Or about $10 per month

Impact by Mileage

Impact by Vehicle Type

Fuel-Efficient Vehicle (35 MPG):

• 15,000 miles: 429 gallons used
• Additional cost: $91.81/year

Average SUV (20 MPG):

• 15,000 miles: 750 gallons used
• Additional cost: $160.50/year

Pickup Truck (16 MPG):

• 15,000 miles: 938 gallons used
• Additional cost: $200.73/year

Commercial Truck (6 MPG, 30,000 miles):

• 30,000 miles: 5,000 gallons used
• Additional cost: $1,070.00/year

Use our Michigan Gas Tax Calculator to calculate your specific impact.

Sales Tax Elimination: The Silver Lining {#sales-tax}

What Changed

Prior to January 1, 2026, Michigan charged 6% sales tax on the retail price of fuel. This tax is now permanently eliminated.

The Math

Example at $3.50/gallon gas:

• Old sales tax: $3.50 × 6% = $0.21 per gallon
• New sales tax: $0.00
• Savings: $0.21 per gallon

For average driver (560 gallons/year):

• Annual sales tax savings: 560 × $0.21 = $117.60

Net Impact Comparison

Here's the complete picture for a typical driver:

The bottom line: For many Michigan drivers, the sales tax elimination nearly offsets the fuel tax increase, especially at current gas prices.

Why It Matters

The net impact varies based on gas prices:

If gas prices rise to $4.00/gallon:

• Sales tax savings increase to $0.24/gallon
• Net impact becomes more favorable to drivers

If gas prices fall to $3.00/gallon:

• Sales tax savings decrease to $0.18/gallon
• Drivers pay slightly more overall

Special Inventory Tax for Businesses {#inventory-tax}

What is the Inventory Tax?

To prevent stockpiling of fuel at the old tax rate, Michigan imposed a one-time inventory tax on fuel held in storage as of 11:59 PM on December 31, 2025.

Who Must Pay?

End Users (3,000-gallon threshold):

• Construction companies
• Trucking companies
• Farms
• Any business with fuel for own use

Fuel Resellers:

• Gas stations
• Fuel distributors
• Wholesalers
• Tank capacity determines threshold:
  • Tanks <10,000 gallons: 200-gallon threshold
  • Tanks ≥10,000 gallons: 400-gallon threshold

Tax Calculation

Tax Rate: 21.4¢ per gallon (the difference between old and new rates)

Formula:

Taxable Gallons = Storage Amount - Threshold
Inventory Tax = Taxable Gallons × $0.214

Example:

• Gas station with 8,000 gallons stored
• Threshold: 200 gallons (small tank)
• Taxable: 8,000 - 200 = 7,800 gallons
• Tax owed: 7,800 × $0.214 = $1,669.20

Filing Requirements

• Form: Michigan Form 4010
• Due date: February 20, 2026
• Payment due: February 20, 2026
• Late penalties: Yes

Use our Michigan Fuel Inventory Tax Calculator to calculate your obligation.

Annual Inflation Adjustments {#inflation}

How It Works

Starting January 1, 2027, Michigan's fuel tax rate will automatically adjust each year for inflation based on the Consumer Price Index (CPI).

The Formula

Annual Adjustment:

New Rate = Previous Rate × (1 + Lesser of 5% or Inflation Rate)

The increase is capped at 5% per year, even if inflation is higher.

Projected Rates

Assuming 3% annual inflation:

If inflation hits 5% (maximum allowed):

Publication Requirements

The Michigan Department of Treasury must:

• Calculate and publish the new rate by December 1 each year
• Post it on their website
• Provide 30 days' notice before the January 1 effective date

How Michigan Compares to Other States {#state-comparison}

Fuel Tax Rankings (2026)

Top 10 Highest State Gas Taxes:

Michigan jumped from 19th to 4th highest fuel tax in the nation.

Border State Comparison

Driving to Neighboring States for Cheaper Gas?

Border counties may see increased cross-border fuel purchases, particularly near Toledo (Ohio) and South Bend (Indiana).

Is it worth it?

• Savings: ~14-20¢ per gallon
• 15-gallon fill-up: $2.10-$3.00 savings
• Consider: Drive time, wear on vehicle, convenience

Read more: Michigan vs Ohio Gas Tax Comparison 2026

Revenue and Infrastructure Plans {#revenue}

Projected Revenue Increase

The fuel tax increase is expected to generate approximately $1.2 billion in additional revenue annually for Michigan's transportation infrastructure.

Where the Money Goes

Michigan Constitution mandates:

• Road construction and reconstruction
• Road maintenance and repair
• Bridge maintenance and replacement
• Highway safety improvements
• Public transit systems

Distribution:

• 39% to Michigan Department of Transportation (MDOT)
• 39% to county road commissions
• 22% to cities and villages

Infrastructure Needs

Michigan has significant infrastructure challenges:

• 40% of roads in poor condition (national avg: 19%)
• 11% of bridges structurally deficient
• Annual funding gap: $2-3 billion

The fuel tax increase addresses roughly half of the annual funding shortfall.

Who's Most Affected {#most-affected}

High-Impact Groups

1. Commercial Drivers

• Semi-truck drivers
• Delivery drivers
• Long-haul truckers
• Impact: $500-$2,000+ annually

2. Rural Residents

• Longer average commutes
• Fewer public transit options
• Impact: $150-$300 annually

3. Low-MPG Vehicle Owners

• Pickup trucks
• Large SUVs
• Older vehicles
• Impact: $180-$250 annually

4. Commuters

• 30+ mile daily commutes
• No carpool/transit options
• Impact: $150-$200 annually

5. Businesses with Fleets

• Delivery companies
• Service businesses
• Construction companies
• Impact: $5,000-$50,000+ annually

Who Benefits?

1. Non-Drivers

• Public transit users
• Cyclists
• Remote workers
• No additional cost, benefit from improved roads

2. Electric Vehicle Owners

• No fuel tax
• (Note: Michigan may implement EV fees in future)

3. High-Efficiency Vehicle Owners

• Hybrids
• Small cars
• 40+ MPG vehicles
• Impact: $80-$120 annually

Planning for Higher Fuel Costs {#planning}

For Individual Drivers

1. Improve Fuel Efficiency

• Maintain proper tire pressure (+3% MPG)
• Regular maintenance (+4% MPG)
• Remove excess weight (+1-2% MPG)
• Reduce idling (saves $10-$50/year)

2. Change Driving Habits

• Combine errands into single trips
• Use cruise control on highways
• Avoid aggressive acceleration/braking
• Plan routes to minimize distance

3. Consider Carpooling

• Share rides with coworkers
• Carpool for kids' activities
• Use rideshare for occasional trips
• Potential savings: $500-$1,000/year

4. Evaluate Public Transit

• Calculate true commuting costs
• Include parking, maintenance, insurance
• Many find transit is cheaper than assumed

5. Vehicle Choice

• When buying next vehicle, factor in fuel costs
• Calculate 5-year fuel expense difference
• Consider hybrid or EV options

For Businesses

1. Optimize Routes

• Use route optimization software
• Reduce empty miles
• Consolidate deliveries

2. Improve Fleet Efficiency

• Regular maintenance schedules
• Driver training on efficient driving
• Consider more efficient vehicles

3. Pass Through Costs

• Add fuel surcharges to invoices
• Adjust pricing to reflect increased costs
• Communicate changes to customers

4. Tax Deductions

• Fuel costs are fully deductible business expenses
• Keep detailed mileage logs
• Consider standard mileage rate vs actual expenses

5. Alternative Fuels

• Evaluate compressed natural gas (CNG)
• Consider electric vehicles for local routes
• Explore biodiesel options

Frequently Asked Questions {#faq}

General Questions

When did the new tax take effect?

January 1, 2026 at 12:00 AM.

Does this apply to diesel fuel?

Yes, both gasoline and diesel are taxed at 52.4¢ per gallon.

What about other fuels?

• Aviation fuel: Different tax structure
• Propane: Not subject to motor fuel tax
• Natural gas (CNG): Separate taxation method
• E85/Ethanol blends: Same rate as gasoline

Will the rate increase again?

Yes, annually starting January 1, 2027, based on inflation (capped at 5% per year).

Sales Tax Questions

Is the sales tax really gone?

Yes, the 6% sales tax on fuel purchases is permanently eliminated as of January 1, 2026.

Does this apply to all fuel sales?

Yes, all retail fuel sales in Michigan are now exempt from the 6% sales tax.

How much does the sales tax elimination save me?

At $3.50/gallon gas, it saves about 21¢ per gallon, or approximately $120/year for a typical driver.

Inventory Tax Questions

Do I need to pay the inventory tax?

Only if you held more than the threshold amount of fuel on December 31, 2025:

• End users: 3,000 gallons
• Resellers: 200-400 gallons (depends on tank size)

When is the inventory tax due?

Report and payment are both due February 20, 2026.

What if I forgot to measure my fuel on Dec 31?

You must make your best estimate based on available records. Keep all documentation supporting your estimate.

What are the penalties for late filing?

Late filing and payment penalties apply. Interest accrues from the due date. File as soon as possible if you're late.

Impact Questions

How much more will I pay per year?

For a typical Michigan driver (14,000 miles/year at 25 MPG): about $120/year more in fuel tax, largely offset by $118/year in sales tax savings, for a net increase of only $2/year.

Will gas prices go up by 21.4¢?

Not necessarily. While the tax increased by 21.4¢, gas stations also stopped collecting the 6% sales tax. The net change in pump price is typically 5-10¢ per gallon, depending on the base price of gas.

Can I deduct this on my federal taxes?

Fuel taxes are only deductible if:

• Used for business purposes (business deduction)
• You itemize deductions and choose to deduct state sales taxes (rare, and fuel tax doesn't qualify)

Most individuals cannot deduct fuel taxes.

Comparison Questions

How does Michigan compare to other states?

Michigan now has the 4th highest gas tax in the nation at 52.4¢/gallon, behind only Pennsylvania (58.7¢), California (57.9¢), and Illinois (54.0¢).

Should I buy gas in neighboring states?

Financially, it only makes sense if:

• You're already near the border
• You need a large fill-up
• The station is convenient

Example: Filling a 20-gallon tank in Ohio saves $2.78 vs Michigan. If you drive 10 miles out of your way (20 miles round trip at 25 MPG = 0.8 gallons), you spend $2.80 in fuel. Not worth it for most people.

Electric Vehicle Questions

Do electric vehicles pay this tax?

No, EVs don't use gasoline or diesel, so they don't pay the fuel tax.

Is there a special tax on EVs instead?

Not currently, but Michigan is considering implementing an annual EV registration fee to ensure EV owners contribute to road maintenance. No specific proposals have passed as of January 2026.

Resources and Tools

TaxPoynt Calculators

• Michigan Gas Tax Impact Calculator - Calculate your personal fuel cost increase
• Michigan Fuel Inventory Tax Calculator - For businesses holding fuel inventory

State Resources

• Michigan Department of Treasury - Motor Fuel Tax Division
• Form 4010 - Fuel Inventory Tax Report
• Michigan Transportation Improvement Association

Related Articles

• Michigan vs Ohio Gas Tax Comparison - Should you buy gas across state lines?

Conclusion

Michigan's 2026 fuel tax increase represents a significant change to the state's transportation funding structure. While the 21.4¢/gallon increase initially appears substantial, the simultaneous elimination of the 6% sales tax largely offsets the impact for most drivers.

Key Takeaways:

1. Net impact is smaller than headlines suggest - Sales tax elimination saves ~21¢/gallon
2. Typical driver pays ~$2 more annually - When accounting for both changes
3. Business inventory tax is significant - File and pay by February 20, 2026
4. Future increases are coming - Annual inflation adjustments up to 5%
5. Revenue funds road improvements - Constitutionally dedicated to transportation

What You Should Do:

✅ Calculate your personal impact using our calculator
✅ Check if you owe inventory tax (businesses/end users with >3,000 gallons)
✅ Plan for future increases - Rates will rise annually with inflation
✅ Consider fuel efficiency when purchasing your next vehicle
✅ Stay informed on how the revenue improves Michigan's roads

About This Guide

This guide is based on:

• Michigan Public Acts 17-20 of 2025
• Michigan House Bill No. 4183 (enrolled)
• Michigan Department of Treasury official notices
• Analysis of Michigan's fuel taxation structure

Last Updated: January 11, 2026
Next Review: July 2026 (or when significant policy changes occur)

Disclaimer: This article provides general information about Michigan's fuel tax changes. It is not legal or tax advice. For specific guidance related to your situation, consult the Michigan Department of Treasury or a qualified tax professional.