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Fuel Tax Changes

Fuel Tax Changes

What's Changing?

We're simplifying how fuel is taxed in Michigan. This is not a price increase.

Quick Summary

Michigan is swapping a volatile tax calculation for a predictable one.

What We Did in 2025

  • Collect sales tax on fuel?
    • Yes, sales tax is 6% so the more expensive the fuel, the more tax is paid.
  • Collect motor fuel tax?
    • Yes, 31.0 cents per gallon.

What We're Doing in 2026

  • Collect sales tax on fuel?
    • No.
  • Collect motor fuel tax?
    • Yes, 52.4 cents per gallon.

Where We'll Send the Money

  • 98% to the Michigan Transportation Fund (MTF) 
    • State Highways (STF): 34.4%
    • County Roads: 34.4%
    • Cities and Villages: 19.2%
    • Comprehensive Transportation Fund for Public Transit: 9.8%
  • 2% to the Recreation Improvement Account 
    • Local Recreation Projects: 2%

The Details

Statutory Update

Under the amended MCL 207.1008, the cents-per-gallon tax rate on motor fuel for the period January 1, 2026, through December 31, 2026, is calculated as follows:

  1. Base rate: 51.0 cents per gallon
  2. Adjustment: Multiply the base rate by 1 plus the lesser of 5% (0.05) or the inflation rate, then round up to the nearest one-tenth of a cent

Rate Information

Inflation Rate Calculation

As defined in MCL 207.1003(3)(l), the inflation rate is determined by:

  1. Calculating the average Consumer Price Index for all urban consumers (CPI-U) for the 12-month period October 2023–September 2024
  2. Calculating the average CPI-U for the 12-month period October 2024–September 2025
  3. Dividing the second average by the first, subtracting one, and expressing the result as a percentage

Based on data released by the U.S. Department of Labor as of October 24, 2025, the inflation rate for the applicable period is 2.7% (0.027). Since this rate is below the 5% threshold, it will be used in the motor fuel tax rate calculation.

 

Resulting Tax Rate for Calendar Year 2026

Applying the 2.7% inflation adjustment to the statutory base rate:

  • 51.0 cents × 1.027 = 52.377 cents
  • Rounded up to the nearest one-tenth of a cent: 52.4 cents per gallon

The 52.4 cents per gallon motor fuel tax rate will take effect January 1, 2026, in accordance with MCL 207.1008.

 

Calculation Note: Motor Fuel Taxation Prior to January 1, 2026

Before January 1, 2026, Michigan applied both a motor fuel tax and a 6% sales tax to motor fuel purchases. The motor fuel tax was a fixed 31 cents per gallon, while the sales tax varied depending on the price of fuel.