Military bonuses get tax-free status under new bill
S. 1856 — A bill to amend the Internal Revenue Code of 1986 to exclude military bonuses from gross income. · Filed by Richard Blumenthal (D-CT) · Introduced May 22, 2025 · Referred to committee
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What it does
This bill amends the tax code to exclude military bonuses from taxable income for service members. Currently, only certain 'qualified military benefits' are tax-free; this bill adds bonuses paid under federal law (chapter 5 of title 37, U.S.C.) to that exclusion, meaning affected service members will owe no federal income tax on those bonus payments.
Why we flagged it
The bill's sole function is to expand the tax-free treatment of military compensation by adding bonuses to the existing exclusion list. It is a targeted tax relief measure for service members.
What the text implies
- The effective date (Jan. 1, 2025) may create retroactive tax relief if the bill passes after that date, potentially requiring amended returns or refunds for service members who already paid tax on 2025 bonuses.
- The scope depends entirely on the definition of 'bonus' under 37 U.S.C. § 5, which is not restated here; the bill's reach is limited by that external statute's language.
Who stands to gain
active-duty service members; reserve and national guard personnel