Sponsor
Richard Blumenthal
Senator · D-CT
Senator · D-CT
The bill increases take-home pay and legal clarity for active-duty service members by excluding certain bonuses from taxable income, at the cost of modest federal revenue loss and short-term payroll/IRS implementation work.
Active-duty service members receive tax-free treatment for certain chapter 5 bonuses, increasing their after-tax pay.
Servicemembers and payroll administrators get clearer tax rules for these bonuses, reducing uncertainty and compliance burden.
Federal revenue is modestly reduced because these bonuses are excluded from taxable income, which could slightly increase the deficit or shift costs to other taxpayers.
IRS, payroll systems, and pay administrators may face short-term complications updating withholding and tax administration procedures to implement the new exclusion effective 2025.
Based on analysis of 2 sections of legislative text.
Adds chapter 5 uniformed services bonuses to the federal exclusion from gross income for qualified military benefits.
Official title: Amend the Internal Revenue Code of 1986 to exclude military bonuses from gross income.
Introduced May 22, 2025 by Richard Blumenthal · Last progress May 22, 2025
Excludes certain uniformed service bonuses from taxable income by adding bonuses paid under chapter 5 of title 37, U.S. Code, to the list of qualified military benefits that are not included in gross income. The change applies to tax years beginning after December 31, 2024, so affected service members will not pay federal income tax on these specified bonuses starting with 2025 tax filings.