The 1.5 million troops who received an unexpected $1,776 so-called “warrior dividend” payment in December won’t have to pay taxes on that money, the Internal Revenue Service has confirmed.
In a Dec. 17 speech, President Donald Trump announced the payments, which he described as a “warrior dividend,“ would be made to 1.5 million troops, and said they were funded by revenue from tariffs and $2.9 billion in the One Big Beautiful Bill Act enacted last July. The Associated Press later reported that the payments weren’t being funded by tariffs.
Active-duty service members in pay grades O-6 and below, and eligible Reserve Component members, received the payments, which were described by the Pentagon as “supplemental basic allowance for housing payments.”
The IRS said in a release Friday that basic allowance for housing payments are “qualified military benefits,” and are specifically excluded from gross income in federal tax law, so they are not taxable.
“The tax-free Warrior Dividend places $1,776 directly in the hands of our warfighters and their families,” Pentagon press secretary Kingsley Wilson said in a Defense Department release Friday.
According to the IRS website, the agency will start accepting tax returns Jan. 26. The deadline to file federal tax returns for 2025, and to pay any taxes due, is April 15, although there are certain extensions available for service members, such as those stationed or deployed overseas.
Federal W-2 tax statements are scheduled to be available on DOD’s myPay site Wednesday for active-duty Army, Navy, Air Force and Space Force. They are already available for active and Reserve Marine Corps; Reserve Army, Navy, Air Force and Space Force members; and military retirees. But Defense Finance and Accounting Service officials note that system maintenance scheduled for Wednesday could affect account functionality between 10 a.m. and 4 p.m. Eastern Standard Time.
Service members and their families have access to free military-specific tax preparation software through MilTax, as well as free one-on-one help by tax consultants, all provided through Military OneSource. Those eligible can file their federal return and up to five state returns for free. Active-duty service members, eligible family members, survivors and recent veterans up to 365 days after their separation or retirement date can file their taxes for free through this benefit.
Some installations may also offer tax preparation services through their military legal assistance offices, on a space-available basis.
Karen has covered military families, quality of life and consumer issues for Military Times for more than 30 years, and is co-author of a chapter on media coverage of military families in the book "A Battle Plan for Supporting Military Families." She previously worked for newspapers in Guam, Norfolk, Jacksonville, Fla., and Athens, Ga.
