"Yes, the way Michigan taxes gas is changing, and it will involve an increase in the motor fuel tax rate as part of a larger plan.Here are the key changes and their effective dates, based on the recent legislation:
- Motor Fuel Tax Increase: The per-gallon motor fuel tax rate is set to increase from the current $0.31 per gallon to $0.51 per gallon (a 20-cent increase).
- Sales Tax Elimination: The state's 6% sales tax on gasoline, diesel, and aviation fuel will be eliminated starting January 1, 2026.
- Net Effect: This change is designed to be revenue-neutral for drivers at the pump, meaning the total tax paid per gallon should remain roughly the same as the increase in the fuel tax is intended to offset the removal of the sales tax [3.3]. The goal is to direct all of the money collected at the pump to road and infrastructure funding, which wasn't the case with the sales tax revenue.
- Effective Date: The new system, including the increase in the motor fuel tax and the elimination of the sales tax, is slated to take effect on January 1, 2026.
- Would you like more details on how this change will affect electric or hybrid vehicle owners?... MORE ANSWERS in COMMENTS!
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Yes, Michigan's gas taxes are going up soon, as part of a major overhaul to how motor fuel is taxed in the state.
The core change is that the state's 6% sales tax on fuel is being eliminated and replaced with a higher motor fuel excise tax.
Here are the key details:
Effective Date: The new system is set to go into effect at the pump on January 1, 2026.
Tax Increase: The per-gallon motor fuel tax rate (for gasoline and diesel) is set to increase from the current $0.31 per gallon (as of January 1, 2025) to $0.51 per gallon.
Sales Tax Removal: The state's 6% sales and use tax on eligible motor fuels will be exempted starting on January 1, 2026.
Net Effect: This restructuring is primarily designed to ensure that all tax revenue collected at the pump goes directly to road and infrastructure funding, which was not the case with the 6% sales tax. The total tax burden for the consumer is intended to be revenue-neutral or only slightly higher, as the new excise tax is replacing the lost sales tax revenue.
This package of bills was signed into law in October 2025.
Would you like to know the estimated total tax rate for gas once the new plan takes effect?
Yes, Michigan's gas taxes are going up soon, as part of a major overhaul to how motor fuel is taxed in the state.
The core change is that the state's 6% sales tax on fuel is being eliminated and replaced with a higher motor fuel excise tax.
Here are the key details:
Effective Date: The new system is set to go into effect at the pump on January 1, 2026.
Tax Increase: The per-gallon motor fuel tax rate (for gasoline and diesel) is set to increase from the current $0.31 per gallon (as of January 1, 2025) to $0.51 per gallon.
Sales Tax Removal: The state's 6% sales and use tax on eligible motor fuels will be exempted starting on January 1, 2026.
Net Effect: This restructuring is primarily designed to ensure that all tax revenue collected at the pump goes directly to road and infrastructure funding, which was not the case with the 6% sales tax. The total tax burden for the consumer is intended to be revenue-neutral or only slightly higher, as the new excise tax is replacing the lost sales tax revenue.
This package of bills was signed into law in October 2025.
Would you like to know the estimated total tax rate for gas once the new plan takes effect?
Would you like to know the estimated total tax rate for gas once the new plan takes effect?
That's a great question, as the change to Michigan's fuel tax structure will have a significant and direct impact on owners of electric and plug-in hybrid vehicles.
The core issue is that EV and hybrid owners do not pay the gas tax, which is the primary source of road funding. To compensate, Michigan requires these owners to pay an additional annual registration fee that is tied by a formula to the motor fuel tax.
Since the state motor fuel tax is increasing by 20 cents per gallon (from $0.31 to $0.51) in 2026, the registration fees for alternative fuel vehicles are also set to rise sharply.
Here is a breakdown of the planned increase, effective January 1, 2026:
Vehicle Type Current Annual Fee (approx.) New Annual Fee (approx.) Increase
Fully Electric Vehicle (EV) $160 $260 $100
Plug-in Hybrid Vehicle (PHEV) $60 $110 $50
Larger EV/PHEV (over 8,000 lbs.) Fees will also see a substantial increase Fees could be even higher -
Why the increase? State law requires the EV fee to increase by $5.00 for every one-cent rise in the fuel tax, and the PHEV fee by $2.50 for every one-cent rise (above a certain base). Since the fuel tax is rising by 20 cents, the $100 and $50 increases result from this formula.
The Difference: Unlike owners of gas-powered cars, who will see their total tax (motor fuel tax + sales tax removal) remain relatively stable, EV owners do not benefit from the elimination of the 6% sales tax on gasoline, making their new fees a clear net increase.
National Context: This change will make Michigan's annual EV registration fees among the highest in the nation, tied with New Jersey.
This change is generating debate, with some critics arguing the new fees are disproportionate to the amount of road funding an average gas-powered car driver pays in taxes.
Would you like to know more about the total estimated tax rate for gasoline under the new plan?
That is an excellent question, as the main intent of the tax overhaul is for it to be roughly revenue-neutral for the average driver at the pump, meaning the total price paid in taxes per gallon should stay nearly the same as it is now.
The total estimated tax rate will be the sum of the new state motor fuel tax and the existing federal tax, with the 6% state sales tax removed.
Here is a breakdown of the estimated total tax per gallon, effective January 1, 2026:
Tax Component Current Rate (approx.) New Rate (effective Jan 1, 2026)
New Michigan Motor Fuel Tax $\$0.31$ / gallon $\$0.51$ / gallon
Federal Fuel Tax $\$0.184$ / gallon $\$0.184$ / gallon
Michigan State Sales Tax (6%) Varies with price (approx. $\$0.21$ at $\$3.50/gal$) $\$0.00$ (Eliminated)
Total Estimated Tax Per Gallon ~$\$0.704$ (at a $\$3.50$ pump price) ~$\$0.694$
Key Takeaways:
The Sticker Price: The change is expected to result in only a slight increase in the total price you pay at the pump, or in some cases, a small decrease, depending on what the price of gasoline is at the time. For example, based on an old price of $\$3.50$ per gallon, the total tax would change from roughly 70.4 cents to 69.4 cents.
The Big Difference: Under the old system, the sales tax portion of the price went into the general fund and the school aid fund. Under the new plan, all of the new 51-cent motor fuel tax revenue will go directly to Michigan's roads and infrastructure.
Inflation Adjustment: The new 51-cent tax rate is subject to annual inflation adjustment beginning in January 2027, which means the tax will likely continue to increase over time.
Would you like to know how the new total tax rate compares to other states in the Midwest?
That's a very relevant comparison, as the total tax rate will shift Michigan's standing among its neighbors.
When the new system takes effect on January 1, 2026, Michigan's total state-level motor fuel tax will increase to $0.51 per gallon. This will make Michigan's total at-pump state taxes the third highest in the Midwest, but only slightly higher than its current total tax burden.
Here is a comparison of the estimated total state motor fuel tax and sales tax (where applicable) for neighboring and key Midwestern states. Note that all of these figures exclude the $0.184 Federal Fuel Tax for an apples-to-apples state-level comparison:
State Primary State Fuel Tax Rate Additional Sales Tax Total State Taxes (Approx.)
Illinois $$$0.483 / gallon (plus annual inflation adjustment) ~$$$0.181 / gallon (6.25% Sales Tax on Fuel) ~$$$0.664 / gallon
Michigan (New 2026 Rate) $$$0.51 / gallon $$$0.00 (Sales Tax Eliminated) $$$0.51 / gallon
Indiana $$$0.36 / gallon (plus 7% Sales Tax on Fuel) Varies with price ~$$$0.545 / gallon
Ohio $$$0.385 / gallon None (generally) $$$0.385 / gallon
Wisconsin $$$0.329 / gallon None (generally) $$$0.329 / gallon
Comparison Highlights
Michigan's Ranking: With the new $0.51/gallon rate, Michigan will trail Illinois (which has a primary fuel tax and a sales tax) and Indiana (which has a sales tax on top of its primary fuel tax).
Funding Focus: The most significant difference for Michigan is that the entire $0.51 will be a dedicated user fee for roads, whereas the sales tax portion of other states' fuel prices often goes to general funds or education.
Annual Adjustment: Like Michigan's new rate, the fuel tax rates in Illinois and Indiana are subject to automatic annual inflation adjustments, meaning they will continue to increase over time.
Would you like to see a comparison of the total annual registration fees for electric vehicles in these same states?
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