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The Internal Revenue Service (IRS) provided good news for U.S. troops on Friday, confirming that the $1,776 one-time “Warrior Earnings” paid to service members in December 2025 are completely tax-deductible, allowing troops to keep every dollar of the bonus.
In a Released FridayThe Treasury Department and the IRS said the “Supplemental Basic Allowance for Housing Payments” introduced to members of the uniformed services in December 2025 “will not be included in income by those who received the payments; they are not taxable.”
Federal tax law specifically excludes from gross income “qualified military benefits,” the agency said, adding that basic allowances for housing payments fall under this category and are therefore not subject to federal income taxes.
The confirmation culminates President Donald Trump’s pre-Christmas announcement that nearly 1.5 million U.S. military service members will receive special “Warrior Dividends” in recognition of their service and to commemorate the country’s nearly 250th anniversary.
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President Donald Trump and Secretary of Defense Pete Hegseth listen during a Cabinet meeting at the White House in Washington, DC (Andrew Caballero-Reynolds/AFP via Getty Images)
“Checks are already on the way,” Trump said during a Dec. 17, 2025, speech from the White House, adding tariffs and the GOP recently passing spending and tax legislation to fund the payments.
He added, “No one deserves this more than our army. I congratulate everyone.”
According to the IRS, Congress appropriated $2.9 billion in legislation enacted last July to supplement the basic allowance for housing owed to members of the uniformed services, with one-time payments of $1,776 funded from that appropriation.
The additional payments were made primarily to active duty members in pay grades O-6 and below, along with eligible Reserve component members as of Nov. 30, 2025, across the Army, Air Force, Navy, Marine Corps and Space Force, the IRS said.
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President Trump celebrates the “awakening of the warrior spirit” within the military during his remarks, Sept. 30, at Marine Corps Base Quantico. (Jim Watson/Getty Images)
Pentagon Press Secretary Kingsley Wilson welcomed the tax treatment in comments reported by the Pentagon News Agency Pentagon NewsSaying that the ruling ensures that the funds reach military families directly.
“Tax-exempt veteran earnings put $1,776 directly into the hands of our fighters and their families,” Wilson said. “The administration is proud to recognize their sacrifices.”
During his December speech, Trump also pointed to what he described as a transformation of the armed forces under his leadership, citing record recruiting and contrasting it with what he described as historically poor recruiting numbers under the previous administration.
Secretary of War Pete Hegseth said the IRS news indicates “what we are doing to rebuild our military.” (Alex Wong/Getty Images)
Trump said: “What difference does one year make?
Secretary of War Pete Hegseth said the profits reflect a broader push to improve the quality of life for military families.
“These Warrior Dividends serve as another example of how the War Department works to improve the quality of life for our military members and their families,” Hegseth said. “All elements of what we are doing are rebuilding our military.
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The War Department and Internal Revenue Service did not immediately respond to Fox News Digital’s request for additional comment.
Fox News Digital’s Alec Schimmel contributed to this report.