Indiana Gas Tax Breakdown: What You Need to Know
Understand the tax structure behind Indiana's gas prices, including how fixed and variable rates are calculated to fund transportation infrastructure.
The price of gasoline includes several taxes from both state and federal governments, which serve as a primary funding mechanism for transportation infrastructure. Understanding the taxes applied to each gallon of gasoline in Indiana provides insight into how these funds are generated. This guide breaks down the tax components of the price per gallon.
Indiana’s State-Level Gas Taxes
Indiana drivers encounter two distinct state-level taxes on gasoline: the gasoline excise tax and the gasoline use tax. Each is calculated differently, and together they form the state’s portion of the total tax on fuel purchases.
The first component is the gasoline excise tax, a fixed, cents-per-gallon charge. For the period of July 1, 2024, through June 30, 2025, the state excise tax rate for gasoline is $0.35 per gallon. This flat-rate structure provides a stable source of revenue as it does not change with the underlying price of gasoline.
A more variable component is the gasoline use tax, which functions as the state’s 7% sales tax on gasoline. Unlike the fixed excise tax, it is calculated monthly based on the statewide average retail price of gasoline from the previous month, excluding other taxes. The Indiana Department of Revenue calculates and publishes this rate each month, as required by Indiana Code 6-2.5-3.5.
The Federal Gas Tax Component
In addition to state-level charges, a federal excise tax is applied to every gallon of gasoline sold in the United States. This tax is a uniform rate across all states.
The current federal excise tax on gasoline is 18.4 cents per gallon. This rate is composed of an 18.3-cent tax for the Highway Trust Fund and a 0.1-cent fee for the Leaking Underground Storage Tank (LUST) Trust Fund. For diesel fuel, the federal rate is higher, at 24.4 cents per gallon. This federal tax has remained unchanged for many years.
Allocation of Indiana’s Gas Tax Revenue
Revenue from Indiana’s state-level gasoline taxes is directed toward specific funds for transportation infrastructure. The money collected is used to maintain and improve the state’s road network and is distributed among state and local government entities.
A significant portion of the gas tax revenue is deposited into the Motor Vehicle Highway (MVH) Account. This account funds the Indiana State Police, the Bureau of Motor Vehicles, and various traffic safety programs. After these expenses, remaining funds are distributed to the Indiana Department of Transportation (INDOT), counties, cities, and towns for road maintenance.
Another destination for these funds is the Local Road and Street (LRS) Account, which supports local governments. The distribution formula for the LRS Account considers factors like population and road mileage. A portion of the revenue is also directed to the State Highway Fund, used by INDOT for major state-level highway projects.