Diesel Relief For Farmers

According to Macrotrends (2026), U.S. average Diesel prices are at $6.28 as of October 19, 2026. That is up 71.2% from $3.67 a year earlier.

As I am sure you have all heard by now, President Trump recently passed Executive Order 14435 “Emergency Tax Relief on Diesel Fuel". This was followed by the IRS issuing two news releases:

While this is much-needed relief for farmers who are already feeling the pressure from high interest rates and skyrocketing input and equipment costs, as it currently reads, this is technically a deferral of the highway diesel tax and waiver of penalties, not a complete waiver of the tax. The IRS does state in IR-2026-122 that they “will explore avenues to eliminate the obligation to pay any amounts deferred”. Technically then, if a farmer used his dyed diesel during this period for on-road use, he would owe the 24.4¢/gallon federal excise tax on those gallons of fuel. In order for the tax to be truly eliminated, it would take an act on the part of the new incoming Congress.

The enforcement on dyed diesel for on-road use after the relief period expires will be interesting, to say the least. The red dye can remain in a fuel system a long time without completely flushing or emptying the system. I am sure there will be farmers who, after finishing their winter grain hauling, will have their semis sit in the shed until the new year with red diesel in them.

Farmers who still have residual dye in their fuel system once the relief period ends may have a hard time proving they truly did not pump dyed diesel outside of the relief period, and inspection officers would have a similarly hard time proving they did. As a result, the IRS mentioned in IR-2026-125 that they are aware of these concerns and that they are considering an appropriate grace period and further guidance will follow.

While the IRS has waived the federal penalties, the state level penalties and taxes are up to each individual state. Taxpayers are recommended to check their state-level relief or lack thereof.

In Nebraska, Governor Pillen signed Executive Order No. 26-21 on September 24, 2026. This 90-day order waives Nebraska penalties for using red-dyed diesel in highway-registered vehicles when transporting qualifying agricultural commodities or livestock. A lesser-known aspect of the order is that vehicles transporting seasonally produced products and livestock now operate up to 25% over legal gross and axle group weight limits without purchasing additional permits or paying associated fees.

Farmers may want to consider flushing the red dye from their fuel systems of on road vehicles near the end of the exemption period. From the latest IRS guidance, farmers do not need to record the gallons of dyed fuel used for on-road purposes. I do expect the soon-to-be-elected Congress to fully forgive the tax. The amount of lost revenue will be tremendous, but I do not see how they will be able to definitively enforce the tax or manage the reaction from taxpayers otherwise. Not to mention the lack of records on the matter for most taxpayers.

On Monday, President Trump announced the $8 billion “Harvest Fuel Relief Program” through USDA with the goal of supporting farmers through the astronomical cost they face to fuel their equipment to bring their crop in and haul it to market.

According to the USDA press release, the amount farmers can expect to reap from the program is unclear at this time…“the Harvest Fuel Relief (HFR) program will provide simple, proportional support to producers using a uniform formula to cover a portion of modeled losses during the 2026 crop year. This national loss average will be based on FSA reported planted acres, Economic Research Service cost of production estimates, and World Agricultural Supply and Demand Estimates yields and prices.”

While we do not have published payment rates or dates at this point, producers should keep this payment in mind as part of their tax planning for 2026 as they approach year-end. Commodity-specific rates for Title I commodities will be released in November.

While both these provisions are wins for farmers in the short term, there is a feeling this is a band-aid on the bigger issue of out-of-control economic pressures on growers that go further than diesel prices.

Thanks for reading,

Blake

The views and opinions expressed here are my own and do not represent those of my employer. This newsletter is intended for general informational purposes only and should not be relied upon as tax advice. No CPA-client relationship is created by reading this content. Always consult a qualified tax professional regarding your individual circumstances. The resources provided are for general information only and have not been verified by Burch & Associates, Inc. or Mark Burch.  Any reliance on or use of the resources, products, or recommendations by the user is at user’s own risk.   Burch & Associates, Inc. and Mark Burch specifically disclaim any responsibility or liability relating to the use of the resources, products and recommendations and shall under no circumstances whatsoever, be liable for any damages, including but not limited to special, incidental or consequential damages which may arise from such use. ime

Macrotrends Fuel Price Tracking: https://www.macrotrends.net/

White House Executive Order 14435 (Emergency Tax Relief on Diesel Fuel): https://www.whitehouse.gov/

IRS IR-2026-122 (Penalty Relief for On-Road Dyed Diesel): https://www.irs.gov/newsroom/

IRS IR-2026-125 (Filing and Recordkeeping Relief for Fuel Excise Taxes): https://www.irs.gov/newsroom/

SBA Office of Advocacy Regulatory Alert: https://advocacy.sba.gov/2026/10/22/irs-grants-dyed-diesel-relief-eases-reporting-and-recordkeeping-after-executive-order/

Nebraska Executive Order No. 26-21 Information: https://revenue.nebraska.gov/motor-fuels/agricultural-diesel-fuel-supply-executive-order-no-26-21-information

USDA Press Release ($8 Billion Harvest Fuel Relief Program): https://www.usda.gov/about-usda/news/press-releases/2026/10/19/trump-administration-announces-8-billion-harvest-fuel-relief-program