This bill amends the Internal Revenue Code to exclude certain military bonuses from gross income for federal tax purposes, effective for tax years beginning after December 31, 2024.
Jennifer Kiggans
Representative
VA-2
This bill amends the Internal Revenue Code to exclude certain military bonuses from gross income for federal tax purposes. Specifically, it adds bonuses paid to uniformed service members under Chapter 5 of Title 37, U.S. Code, to the list of qualified military benefits that are tax-exempt. This exclusion applies to tax years beginning after December 31, 2024.
Military Bonuses Get Tax Break: Service Members Keep More Pay Starting 2025
If you’re in the uniformed services and planning on collecting a bonus, this bill is good news for your bank account. The legislation amends the Internal Revenue Code of 1986 to exclude certain military bonuses from being counted as taxable gross income. Specifically, it targets any bonus paid under Chapter 5 of Title 37, U.S. Code, ensuring that these payments are treated the same way as other “qualified military benefits.” This means when you file your federal taxes, you won't owe the government a cut of that bonus money.
The Real-World Impact on Service Paychecks
Think of it this way: right now, if you get a $10,000 reenlistment bonus, a chunk of that goes straight to Uncle Sam in taxes. Depending on your tax bracket, that could be $1,200 to $2,200 you never see. Under this new provision, that entire $10,000 stays in your pocket. For service members—especially junior enlisted personnel or those struggling with rising costs of living—that extra cash makes a huge difference. It increases the effective value of recruitment and retention incentives, turning a promised benefit into a full, untaxed payment.
When the Change Kicks In
The implementation isn't immediate, so don't expect to see this on your 2024 tax return. This change applies to tax years beginning after December 31, 2024. So, any qualifying bonus you receive in 2025 or later will be covered by this exclusion. This gives the IRS and military payroll systems time to adjust, but more importantly, it gives service members clarity on future financial planning related to these bonuses.
Cutting Through the Tax Jargon
The bill achieves this by updating Section 134 of the Internal Revenue Code. Section 134 is the part of the tax code that defines what counts as a “qualified military benefit” that is exempt from taxes. By specifically adding Chapter 5 bonuses (which include things like enlistment, reenlistment, and hazardous duty bonuses) to this list, the legislation cleanly and directly removes the tax burden. This is a straightforward benefit with low vagueness, meaning the intent—to give service members more take-home pay—is clear and effective.