The Internal Revenue Service (IRS) has officially confirmed that the one-time $1,776 “Warrior Dividend” paid to more than 1.5 million U.S. service members in December 2025 is not taxable, allowing recipients to retain the full amount without federal income tax withholding.
The announcement by the Department of the Treasury and the IRS clarifies that the supplemental payment — issued as additional basic allowance for housing (BAH) — qualifies as a “qualified military benefit” under U.S. tax law and is therefore excluded from service members’ gross income for tax purposes.
The bonus was rolled out following a December 2025 directive from President Donald J. Trump, intended both to express national gratitude for military service and to commemorate the 250th anniversary of the U.S. military’s founding, with the $1,776 amount symbolizing the year of the nation’s independence.
Pentagon officials underscored that the tax-free status enhances the impact of the dividend by putting more money directly into the hands of service members and their families. Pentagon Press Secretary Kingsley Wilson said the measure reflects the nation’s appreciation for the sacrifices of military personnel, and Secretary of War Pete Hegseth described it as part of broader efforts to support quality of life for the armed forces.
Under the IRS guidance, the Warrior Dividend’s tax-exempt status applies across active-duty and eligible reserve service members who received the supplemental housing allowance payment in December, reinforcing longstanding tax treatment of qualified military benefits as excluded from taxable income.
The IRS confirmation aims to provide clarity to service members and tax professionals alike, ensuring that recipients do not have to report the $1,776 payment as taxable income on their federal tax returns for the 2025 tax year.
