(COLDWATER) - Michigan's new fuel tax system is now in effect, shifting how road and bridge repairs are funded statewide. As of January 1, 2026, the state eliminated the 6 percent sales tax on gasoline and replaced it with a higher flat fuel tax per gallon.
Under the new system, the state fuel tax rises from about 31 cents to 52.4 cents per gallon. Because the sales tax has been removed, the net increase for drivers is expected to be about 1.4 cents per gallon.
Unlike the previous structure, where most sales tax revenue went to schools and the general fund, all revenue from the new fuel tax is deposited into the Michigan Transportation Fund for infrastructure projects. The tax will also be adjusted annually for inflation beginning in 2026.
The total tax impact will vary depending on gas prices. At roughly $3.50 per gallon, drivers pay about the same as under the old system. When prices are lower, drivers pay slightly more in total taxes, and when prices are higher, they pay slightly less.
The legislation also increases annual registration fees for electric and plug-in hybrid vehicles, with increases of about $100 for fully electric vehicles and $50 for plug-in hybrids. State officials say the changes are expected to generate about $1.05 billion in the first full year to address long-term road and bridge needs.