The Federal Gas Tax Suspension: All You Need to Know
TurboTax Canada
July 21, 2026 | 6 Min Read
Key Takeaways:
- The federal government has temporarily suspended the federal fuel excise tax.
- Until September 7, 2026, Canadians will save 10¢ per litre on gas and 4¢ per litre on diesel.
- This fuel tax suspension is aimed at helping Canadians keep costs down in the face of rising oil prices.
If today’s gas prices have you questioning whether to take that epic summer road trip, you’re not alone. Drivers across Canada are feeling the sting at the pumps, adding pressure to the already high cost of living. While some might be able to simply drive less or switch to electric, that’s not an option for everyone. For many, gas is an essential, not a luxury.
To offer some relief at the pump, the federal government introduced a temporary suspension of the federal fuel excise tax. But what does that mean, how long will it last, and how much difference will it actually make to your bottom line? Here, we explain the details.
What is the federal excise tax?
An excise tax is an indirect tax that governments impose on specific goods, such as fuel, alcohol, and tobacco. Unlike sales taxes, which are charged directly to consumers, excise taxes are levied on manufacturers and wholesalers.
These businesses typically pass those costs to consumers in the form of higher prices. The federal fuel excise tax on gasoline and diesel is charged as a fixed amount per litre, separate from GST/HST and any provincial taxes, and it’s embedded in the price you see at the pump.
The current excise tax on fuel is 4¢ per litre on diesel and 10¢ per litre on unleaded gasoline.
What is the federal gas tax suspension?
The federal gas tax suspension is a short-term pause on the federal fuel excise tax, effective from April 20, 2026, until September 7, 2026.
Some background: the federal government announced plans to suspend the gas tax in April 2026. Bill C-30, which includes the gas tax suspension, received Royal Assent on June 19, 2026. It applies not just to motor vehicle fuel but also to aviation fuel.
What does this mean for the average driver?
In theory, the temporary suspension of the federal fuel excise tax would make gasoline 10¢ cheaper per litre and diesel, 4¢ cheaper per litre.
Because the GST/HST is applied on top of the fuel excise tax—a tax on a tax—drivers could see prices fall by slightly more than the value of the excise tax break.
Let’s say you drive a Toyota Corolla, live in Vancouver, and need half a tank of gas—that’s about 25 litres. At 10¢ a litre, the federal gas tax suspension would save you $2.50 on that fill-up.
You’d also save an additional 13¢ (5% of $2.50) from the GST savings, bringing your total savings to about $2.63.
What is not changing?
A lot goes into the cost of gas, and the federal fuel tax is just one component. Other factors include:
- Crude oil prices
- The cost of turning that oil into gasoline
- The cost of running a gas station
- Provincial or municipal gas taxes and applicable sales taxes
There are no other scheduled changes to gas taxes. As for the first three factors, they’ll keep making gas prices go up and down like they always do. (More on that below.)
The global supply disruption and oil market volatility
The oil market has seen a lot of volatility this year due to politics and war. Specifically, the closure of the Strait of Hormuz following attacks on Iran by the US and Israel set off historic disruptions to oil supply.
Only time will tell how long this conflict lasts and how other events (such as Ukraine targeting Russian oil refineries) will also affect global supply—and prices.
Why do gas prices still fluctuate?
Gas prices tend to follow crude oil prices, but not always immediately. It can take time for changes in oil costs to work their way through the supply chain—from the oil field to the refinery and eventually to the pump.
Refinery problems, supply disruptions, and other market factors can also cause gas prices to rise or fall sharply.
Gas prices also vary from station to station and region to region. That’s partly because of taxes, which are different across the country. Local competition, seasonal demand, and inventory levels can also affect the cost of gas.
Less gas tax = more money in your pocket (for now)
The temporary federal gas tax suspension isn’t a huge savings for most Canadian households, but for those looking to cut costs, every penny matters.
Just remember that it’s a short-term benefit for drivers, and that tax is only one of the many factors that go into the price of gas.
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FAQs
Provincial and territorial consumption taxes on gas and diesel vary widely, from 6.2¢ per litre in Yukon to 27¢ in British Columbia (Vancouver area), as of December 2025. See all federal and provincial petroleum product consumption taxes.
If you’re a salaried, commissioned, or transport employee who pays for fuel or other eligible motor vehicle expenses under an employment contract, your employer might provide you with a signed T2200 Declaration of Condition of Employment.
You don’t have to file the T2200 with your tax return (just hold on to it in case the CRA asks), but you do need to file the T777 Statement of Employment Expenses form to calculate allowable expenses. Learn more about claiming motor vehicle expenses as an employee.
If you’re self-employed and you use your vehicle for the purpose of earning a profit, you can claim fuel costs and other motor vehicle expenses such as license and registration fees, insurance, maintenance and repairs, and leasing costs.
If you also use the vehicle for personal use, you can deduct only the portion of expenses directly related to earning money. Learn more about claiming auto expenses as a self-employed person.
- Accelerate gradually and avoid braking suddenly.
- Drive at a steady speed. Dips and surges in speed use more fuel.
- Avoid high speeds. Most passenger vehicles are most fuel-efficient cruising at 50 to 80 kilometres per hour.
- Slow down by coasting. Looking ahead will help you judge when to take your foot off the gas.
- Avoid idling.
- Ease up on the air conditioning. A/C can increase fuel consumption by up to 20%.
- Keep your tires inflated. This reduces fuel usage and wear-and-tear on your wheels.
- Lighten your load. Removing unnecessary weight from your vehicle can save gas.
- Use a gas app to find cheaper prices in your neighbourhood.
- When buying or leasing a car, consider a hybrid or electric vehicle, or look for better fuel efficiency. Check out Natural Resources Canada’s annual Fuel Consumption Guide for stats.
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