Diesel Tax Changes in 2025: What You Need to Know

State budgets often drive mid-year and new-year tax adjustments, making January and July key months for diesel tax updates. This January, 14 states introduced notable adjustments. In this blog, we highlight the diesel fuel tax per state that directly impact transportation costs and industry operations.

Small diesel fuel tax adjustments with big implications

Even minor changes in diesel fuel taxes can ripple through transportation budgets. Eight states, including Alabama, Florida, Georgia, Michigan, Nebraska, New York, North Carolina, and Vermont, implemented modest increases of one cent or less. These adjustments are often tied to automatic mechanisms, such as inflation or other predefined criteria, ensuring that tax rates remain responsive to economic trends.

Significant diesel fuel tax per state increases

Several states introduced more substantial tax hikes, reflecting efforts to maintain consistent revenue streams for infrastructure needs:

• Minnesota: Diesel excise tax increased by 3.3 cents, rising from 28.5 to 31.8 cents per gallon. The adjustment follows a 2023 law linking tax rates to inflation.
• New Jersey: Diesel taxes went up by 2.6 cents, now reaching 51.9 cents per gallon. This reflects a revenue-focused rule that adjusts rates based on financial targets.
• Utah: A 2-cent increase raised diesel taxes to 38.5 cents per gallon, calculated using a formula tied to the average rack price of fuel.

The complexity behind automatic diesel fuel tax adjustments

Many states employ automatic adjustment mechanisms to keep diesel fuel tax rates aligned with economic conditions. These methods include:

• Taxes based on a percentage of fuel prices
• Flat excise taxes
• Inflation-driven calculations

These systems allow states to sustain long-term funding for infrastructure and transportation projects, ensuring smoother operations and maintenance. However, they also present challenges for shippers and carriers managing fluctuating transportation costs.

Navigating the impact of diesel fuel tax per state changes

For shippers and carriers, staying informed about diesel fuel tax per state adjustments is critical to managing budgets and optimizing operations. These changes can directly influence freight costs, making it essential to proactively adapt strategies for fuel efficiency and cost management.

If you’re looking to understand how these adjustments affect your business and are interested in tailored solutions to optimize your transportation network, contact us! Breakthrough’s market-based fuel reimbursement solution, Fuel Recovery, calculates your exact reimbursement based on the time, tax, price, and geography of your individual freight movements.