Trump signs order for cheaper, 'red-dyed' diesel — avoids federal highway tax
Executive Order enables cheaper diesel, bypassing US federal highway tax
US President Donald Trump has signed an Executive Order late on Monday to immediately cut diesel costs by temporarily allowing highway use of tax-free "dyed diesel" and deferring the federal diesel tax on that fuel through the end of the year — with no interest, no penalties.
The order temporarily waives the “off-road only” rule for tax-exempt red-dyed diesel and defers the federal excise tax on that fuel when it is used on public highways, through the end of 2026.
The move provides a cost relief at the pump for diesel users. Red-dyed diesel is typically about 24 cents per gallon cheaper than clear on-road diesel because it avoids the federal highway tax.
At current prices above $6/gallon in many areas, that’s a modest but meaningful discount for high-volume users like farmers and fleets.
Under normal US rules, red-dyed diesel is meant for off-road use only (farm equipment, construction machinery, generators, heating) and is exempt from the 24.4 cents-per-gallon federal highway excise tax that applies to on-road diesel.
The red dye is a marker so inspectors can spot illegal on-road use.
The new order changes that for the rest of the year:
Anyone can buy red-dyed diesel and use it in on-road vehicles without immediately owing the federal diesel tax, according to the White House.
The federal government will defer collection of the 24.4¢/gallon tax on on-road use of dyed diesel through December 31, 2026, with no interest or penalties for nonpayment during that period.
The order directs Treasury (in consultation with the Defense/War Department) to explore ways to eliminate the deferred tax obligation entirely, though that would require further action and is not automatic.
It also encourages federal and state authorities to use enforcement discretion to halt routine inspections and waive tax liabilities that would normally arise from on-road use of dyed diesel.
In practice, this means farmers, truckers and other diesel users can legally fill up with cheaper, tax-exempt red-dyed diesel for highway driving for the rest of the year without fear of immediate federal penalties, as long as they comply with any state-level rules that remain in place.
