Nearly 1.5 million U.S. service members who received the one-time $1,776 “Warrior Dividend” in December 2025 can keep the full amount, after the Internal Revenue Service confirmed the payment is tax-free.
The IRS and Treasury Department said in a Friday release that “supplemental basic allowance for housing payments” issued to uniformed service members in December 2025 “are not to be included in income by those who received the payments; they are not taxable.”
Federal tax law excludes certain “qualified military benefit[s]” from gross income, the agencies said, and basic allowances for housing fall within that category—meaning the supplemental payments are not subject to federal income tax.
The clarification follows President Donald Trump’s pre-Christmas announcement that close to 1.5 million service members would receive a special payment described as a “Warrior Dividend,” which he framed as recognition for military service and tied to the nation nearing 250 years since its founding.
“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 issued 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.
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.
“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.”
The Department of War and the Internal Revenue Service did not immediately respond to Fox News Digital’s request for additional comment.
