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The Internal Revenue Service (IRS) delivered good news for America’s troops Friday, confirming that the one-time $1,776 “Warrior Dividend” paid to service members in December 2025 is completely tax-free, allowing troops to keep every dollar of the bonus.
In a Friday release, the Treasury Department and the IRS said that “supplemental basic allowance for housing payments” made to members of the uniformed services in December 2025 “are not to be included in income by those who received the payments; they are not taxable.”
The agency said federal tax law specifically excludes from gross income a “qualified military benefit,” adding that basic allowances for housing payments fall under that category and therefore are not subject to federal income taxes.
The confirmation caps off President Donald Trump’s pre-Christmas announcement that nearly 1.5 million U.S. service members would receive a special “Warrior Dividend” in recognition of their service and to commemorate roughly 250 years since the nation’s founding.
President Donald Trump and Secretary of War Pete Hegseth listen during a Cabinet Meeting in the White House in Washington, D.C. (Andrew Caballero-Reynolds/AFP via Getty Images)
“And the checks are already on the way,” Trump said during a Dec. 17, 2025, primetime address from the White House, crediting tariffs and recently passed GOP spending and tax legislation for funding the payments.
“Nobody deserves it more than our military. And I say congratulations to everybody,” he added.
According to the IRS, Congress appropriated $2.9 billion in legislation enacted last July to supplement the basic allowance for housing payable to members of the uniformed services, with the one-time $1,776 payments funded by that appropriation.
The IRS said the supplemental payments were made primarily to active-duty service 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.
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President Trump celebrates “reawakening the warrior spirit” within the military during remarks, Sept. 30, at Marine Corps Base Quantico. (Jim Watson/Getty Images)
Pentagon press secretary Kingsley Wilson welcomed the tax treatment in remarks carried by Pentagon News, saying the ruling ensures the money reaches military families directly.
“The tax-free Warrior Dividend places $1,776 directly in the hands of our warfighters and their families,” Wilson said. “The department is proud to recognize their sacrifice.”
During his December address, Trump also pointed to what he described as a turnaround for the armed forces under his leadership, citing record enlistment and contrasting it with what he called historically poor recruitment numbers under the previous administration.
Secretary of War Pete Hegseth said the IRS news points to ‘what we’re doing to rebuild our military.’ (Alex Wong/Getty Images)
“What a difference a year makes,” Trump said.
Secretary of War Pete Hegseth said the dividend reflects a broader push to improve quality of life for military families.
“This Warrior Dividend serves as yet another example of how the War Department is working to improve the quality of life for our military personnel and their families,” Hegseth said. “All elements of what we’re doing are to rebuild our military.
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The Department of War and the Internal Revenue Service did not immediately respond to Fox News Digital’s request for additional comment.
Fox News Digital’s Alec Schemmel contributed to this reporting.
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