Drivers in Michigan are set to pay more at the pump in the New Year as changes to the state’s fuel tax system take effect.
Beginning Jan. 1, 2026, Michigan will eliminate its 6% sales tax on gasoline and replace it with a higher cents-per-gallon fuel tax. The change will raise the state fuel tax to about 52.4 cents per gallon, up from the current 31 cents.
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Unlike the sales tax, which flowed into the state’s general fund, all of the money collected under the new fuel tax structure will be dedicated to transportation funding. State officials say the shift is designed to create a more reliable, long-term source of revenue for repairing and maintaining Michigan’s roads and bridges.
“I ran on fixing the damn roads, and I’m proud to keep my promise and get it done,” Governor Whitmer said in a press release on Oct. 13, 2025. “This year’s balanced, bipartisan budget makes a record, nearly $2 billion annual investment to fix our state and local roads, which will make everyone’s drive safer and faster. We’re getting this done by ensuring every penny you pay at the pump goes towards our roads. I’m so grateful to legislators on both sides of the aisle for coming together to get this done so we can build reliable roads that last for decades while supporting tens of thousands of good-paying local jobs. We have a lot of work to do, so let’s move some dirt and fix those damn roads!”
The rise in gas prices comes from the yearly adjustment to the fuel tax for inflation. The Treasury Department set the increase at 2.7% for 2026.
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Drivers of electric and plug-in hybrid vehicles will also see higher costs beginning in 2026.
Under the new transportation funding plan, registration fees for these vehicles will increase to account for their reduced contribution to fuel taxes.
According to the House Fiscal Agency, the changes would raise annual fees by about $50 for plug-in hybrid vehicles and by about $100 for fully electric vehicles. The agency estimates the increases will generate approximately $11 million in additional state-restricted revenue to help fund road repairs and infrastructure improvements statewide.
For more about the transportation funding package, visit here.