US waives red diesel tax record requirements to entice buyers

Jennifer A. Dlouhy, Bloomberg News on Oct 21, 2026

By clicking submit, I authorize Arcamax and its affiliates to: (1) use, sell, and share my information for marketing purposes, including cross-context behavioral advertising, as described in our Privacy Policy , (2) add to information that I provide with other information like interests inferred from web page views, or data lawfully obtained from data brokers, such as past purchase or location data, or publicly available data, (3) contact me or enable others to contact me by email or other means with offers for different types of goods and services, and (4) retain my information while I am engaging with marketing messages that I receive and for a reasonable amount of time thereafter. I understand I can opt out at any time through an email that I receive, or by clicking here

The Trump administration is waiving recordkeeping requirements in a bid to encourage farmers, truck-stop operators and other companies to buy tax-exempt red diesel.

The move, part of President Donald Trump’s effort to combat high diesel costs by expanding sales of a tax-exempt variety, was described by an administration official who asked not to be named because details had not yet been formally announced.

In formal guidance expected to be issued Wednesday, the Internal Revenue Service will announce temporary relief from tax-related reporting and recordkeeping requirements tied to red-dyed diesel. The off-road version of the fuel is dyed red to set it apart from clear diesel that’s federally taxed at a rate of 24.4 cents a gallon.

The IRS also will clarify that it won’t challenge temporary failures to meet return-filing, reporting or recordkeeping requirements related to taxable uses of dyed diesel between Oct. 1 and Jan. 1, 2027. The IRS also will not assert civil penalties or additional taxes in connection with Trump’s order, the administration official said.

More guidance from the federal government has been eagerly sought by buyers and sellers of diesel, who have wondered how they could take advantage of Trump’s new policy. The IRS information may reassure them they can purchase dyed diesel now without being hit with a tax bill later.

The IRS also is considering a grace period and other options to address worries about residual red dye remaining in fuel tanks after the president’s relief period ends, the administration official said.

Trump signed a directive earlier this month authorizing wider sales of dyed diesel, designed to effectively waive the tax on conventional diesel without help from Congress ahead of the November midterm elections.

Polls show voters frustrated over the cost of living and Trump’s war on Iran are poised to take out their anger on the president’s fellow Republicans at the ballot box, polls show. The average national price for diesel is currently about $6.32 per gallon, according to auto club AAA, near an all-time high hit in September.

The dyed diesel move is one of several White House efforts to counter fuel costs that have surged as wars in Russia and the Middle East pare refining capacity and the shipment of petroleum products globally.

High prices for diesel have been a particular flashpoint in heartland and rural states, where it is used as a source of power as well as fuel for farm equipment.

Trump’s plan effectively allows more widespread use of red or dyed diesel, which is generally available for off-road purposes, such as in farm and construction equipment. Red diesel is exempt from the federal excise tax and enabling its use in on-road vehicles without penalties could translate into an effective tax break in some cases.