The US has temporarily eased federal tax and penalty restrictions on the use of red-dyed diesel on the roads: the IRS is applying the relief from 1 October to 31 December 2026. However, this decision does not override the taxes, bans and penalties imposed by individual states.
Briefly about the main points
- The IRS will not impose fines at federal level for the on-road use of red diesel until 31 December.
- Trump’s executive order is dated 5 October, and the IRS extended the relief retrospectively from 1 October.
- States may retain their own taxes, bans and sanctions.
- Trump announced a planned support programme for farmers worth $8 billion.
How the federal relief scheme works
US Presidential Decree Donald Trump No. 14435, dated 5 October 2026. Following this, the US Internal Revenue Service announced that it would not impose federal penalties for the sale or use of tinted diesel in road transport during the period from 1 October to 31 December 2026.
Red Diesel It is commonly used in agricultural and other off-road machinery. The dye makes it possible to monitor fuel intended for tax-exempt use; standard diesel is usually used for road transport.
States are maintaining their own restrictions
The IRS has specifically emphasised that the federal relief does not alter state taxes, regulations or penalties. Therefore, eligibility for the relief depends on local legislation and the category of transport.
In Kansas, the law prohibits the operation of road vehicles with coloured fuel in the tank, except in certain circumstances. Under certain regulations, fines can range from $1,000 to $10,000, and unlawful use may result in criminal prosecution.
On 21 October, the Tax Service also acknowledged the issue of the residual red dye in fuel tanks once the concession has ended. The regulator is considering the possibility of a transition period or other mitigating measures.
In Iowa, Governor Kim Reynolds has separately eased some of the restrictions on the transport of certain agricultural goods, including soya, maize, hay, livestock, animal feed and fertilisers. This decision remains in force until 2 February 2027.
Trump has announced a separate compensation scheme
On 19 October, Trump announced the planned launch of the Harvest Fuel Relief Programme — a programme providing $8 billion in support to compensate farmers for their diesel costs. The Associated Press reported on the President’s announcement.
This is an announcement regarding a future scheme, not payments that have already been made. The final rules, application deadlines and the mechanism for disbursing funds have not yet been published in the available source documents.
Until the federal relaxation of restrictions ends on 31 December, farmers and hauliers should take their own state’s regulations into account separately, as the federal exemption does not override local restrictions.
