What is the federal gas tax?

When you fill up your vehicle’s gas tank, you may or may not realize that the price you pay includes the federal gas tax. So what is the federal gas tax? 

It’s an excise tax, which means it’s imposed on goods or services. In this case, it’s levied on gasoline and diesel fuel sales, and it funds transportation-related services like highway repairs, public transit and more. 

Key takeaways

  • The federal gas tax is an excise tax levied on gasoline and diesel fuel sales.
  • All 50 states also levy taxes on gasoline and diesel sales.
  • The revenue from gas taxes funds things like road construction and maintenance, as well as public transportation.
  • The federal gas tax has been 18.4 cents per gallon since 1993.

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How do gas taxes work?

Gas taxes—sometimes called fuel taxes or motor fuel taxes—are federal and state consumption taxes levied on gasoline and diesel. Gas taxes were first introduced as part of the 1932 Revenue Act. 

At the federal level, the gas tax has remained at 18.4 cents per gallon of gasoline since 1993. Most of this revenue goes into the Highway Trust Fund, which pays for major highways and public transportation. 

State gas tax rates

State taxes on gas can vary by location, ranging from 5.0 cents per gallon in Connecticut to 67.4 cents per gallon in Illinois, as of February 2023. State gas taxes can include things like environmental taxes and inspection fees.

Depending on the jurisdiction, there may be various tax rates for different motor vehicle classes. For example, states may have special tax rates for different types of fuel like ethanol, jet fuel, aviation gasoline and more.

What does the gas tax pay for?

The revenue from the federal gas tax—and many state gas taxes—helps maintain and repair highways. At the state level, tax revenue may also be distributed differently based on need. For instance, New York allocates a portion of the tax revenue to mass transportation. And Texas uses a quarter of its gas tax revenue to fund schools.

What is a gas tax holiday?

A gas tax holiday occurs when the federal or state government suspends gas taxes temporarily to lower gasoline prices for consumers. For example, in 2022, the federal government and multiple state governments declared a gas tax holiday for several months.

More federal gas tax FAQ

Still want to learn more? Here are some frequently asked questions about gas taxes. 

The federal gasoline tax has been at 18.40 cents per gallon since 1993. And with various state taxes, it’s higher. As of February 2023, the average state tax on gasoline is 31.63 cents per gallon.

The federal diesel fuel tax rate is 24.40 cents per gallon. The average state tax on diesel is 33.88 cents per gallon, as of February 2023.

Excise taxes, including the gas tax, aren’t deductible if they are for personal expenses. If gas is a business-related expense, a taxpayer may be able to deduct it.

As of February 2023, Illinois has the highest gas tax at 67.4 cents per gallon, according to the U.S. Energy Information Administration. Keep in mind, these numbers can change.

The gas tax in a nutshell

When you fill up your vehicle’s gas tank, it can be helpful to know what’s included in the cost and where those funds go. But keep in mind, gas taxes can change—or be temporarily suspended if there’s a holiday gas tax.

Curious about other taxes? Keep reading about what taxes are, how they work and more.

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