Depending on where you live, you may start having to pay a vehicle miles traveled (VMT) tax based on how much you drive. Here’s how it works.
What’s a vehicle miles traveled tax?
A vehicle miles traveled tax is a tax on the miles that you drive. For example, if the VMT tax is $0.01 per mile and you drive 100 miles, you’ll pay $1 in tax.
The purpose of a VMT tax is to make up for declining gas tax revenue. With more electric vehicles, hybrid cars, and even just more fuel-efficient vehicles hitting the road, governments are bringing in less money from fuel taxes.
Governments have always viewed the fuel tax as a user fee where people who drive the most pay the most. The gas tax helps pay for things like road maintenance and new roads, so even when vehicles aren’t using gas, they’re still adding to those costs.
Related: Truck Driver Taxes
How does a VMT tax work?
A VMT tax requires you to report your miles traveled to the government agency responsible for collecting the tax. Some places also record your time of travel and charge a higher tax rate during peak hours as a way of reducing traffic congestion.
A handful of states have adopted pilot programs where a small number of drivers sign up for the vehicle miles traveled tax on a voluntary basis. The pilot program usually asks drivers to download an app that tracks their miles.
Governments can also collect vehicle miles data at annual inspections or when people bring their cars in for maintenance.
People understandably have privacy concerns, so it’s safe to say that any widespread VMT tax would likely need to use less intrusive data collection than the pilot program.
Is there a federal VMT tax?
There is not currently a federal VMT tax, and the federal government doesn’t have immediate plans to start one. The Congressional Budget Office is currently exploring the feasibility of implementing a VMT tax program.
The Department of Transportation is looking at several alternatives to replace declining fuel tax revenues including a vehicle miles traveled (VMT) tax, increased tolling, and funding the highway trust fund through general tax collection.
What states have a VMT tax?
There are currently two states with a form of vehicle miles traveled (VMT) tax.
Oregon
Oregon currently has a weight-mile tax for commercial vehicles weighing over 26,000 pounds.
Oregon’s tax rate ranges from 7.2 cents per mile to 33.33 cents per mile depending on the vehicle’s weight and number of axles.
Oregon is also considering expanding VMT taxes to all drivers starting in 2026 or 2027. The new VMT taxes would mainly target electric vehicles and highly fuel-efficient cars. Other drivers would continue to pay gas taxes.
Utah
Utah’s VMT tax is called the Road Usage Charge.
The Road Usage Charge is a voluntary tax program open to drivers of electric vehicles, plugin-hybrid vehicles, and gas-hybrid vehicles. Those vehicles normally have to pay a flat road user fee of $20.50 for gas hybrids, $53.25 for plugin-hybrids, and $123 for electric vehicles.
Drivers who sign up for the Road Usage Charge pay 1.52 cents per mile. User fees never exceed the flat-fee rates.
For example, an electric car owner will pay $15.20 for every 100 miles driven. At 8,092 miles driven, the per-mile charge equals the flat fee amount. An electric vehicle road user who drives more than 8,092 miles during the year only pays for the first 8,092 miles traveled.
When do you pay VMT taxes?
Current VMT tax programs work similarly to toll collection passes like E-ZPass. Drivers pre-fund their accounts and taxes are deducted as they drive. When their balance gets too low, their account automatically refills using a connected credit card or bank account.
Can you deduct VMT taxes?
Since per-mile taxes are new, there isn’t much guidance on available tax deductions.
For personal taxes, per-mile tax charges don’t seem to fit into existing deductions. Road user fees aren’t a property tax since they’re not based on the vehicle’s value. Per-mile road user charges also aren’t a sales tax since they’re not based on the value of something you’re buying.
For business taxes, including independent contractors, it’s safe to assume that a VMT tax is deductible. You can already deduct gas tax because you can generally deduct the entire cost of gas you use for business trips.
If you drive the same vehicle for both business and personal reasons, don’t forget that only the tax on your business miles is a business expense. You can’t deduct the portion of the tax paid on your personal miles.
The remaining question is whether you could take an additional deduction for VMT tax if you use the standard mileage deduction. The argument against an additional deduction is that the standard mileage rate already covers gas taxes. The argument for an additional deduction is that the IRS lists what the standard mileage rate covers, and per-mile user fees aren’t listed.
Will VMT tax replace the gas tax?
There is no clear answer to whether miles-driven taxes will replace fuel taxes since any per-mile tax would be a new law.
Utah’s per-mile tax program is one possible answer where the miles driven tax rate depends on how much gas tax each type of car will pay. Drivers paying more gas taxes may have to pay less per mile.
Another option is that the government may leave fuel taxes in place and add a miles-driven tax as a way to encourage drivers to buy cars with higher fuel efficiency.
Will VMT increase with gas prices?
When gas prices increase, you may be used to seeing the IRS standard mileage rate increase or businesses increasing their mileage charges. That’s because those mileage rates are designed to cover the current per-gallon cost of gas.
A VMT tax should be more immune to changes in gas prices. Per-mile tax revenues go toward road maintenance and construction. Gas for construction vehicles is only a small part of those costs.
