IRS confirms $1,776 ‘Warrior Dividend’ tax-free for service members

The Internal Revenue Service (IRS) had good news for American troops on 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.

One Friday broadcastThe “supplemental base allowance for housing payments” made to uniformed service members in December 2025 “will not be included in the income of those receiving the payments; they are not subject to tax,” the Treasury Department and the IRS said.

The federal tax code specifically excludes “qualified military assistance” from gross income, the agency added, adding that basic allowances for housing payments fall into this category and are therefore not subject to federal income tax.

The approval caps off President Donald Trump’s pre-Christmas announcement that nearly 1.5 million U.S. service members will receive a special “Warrior Dividend” in recognition of their service and commemorating the nearly 250th anniversary of the nation’s founding.

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“And the checks are already on the way,” Trump said in his first speech at the White House on Dec. 17, 2025, crediting tariffs and recently accepting GOP spending and tax legislation to fund the payments.

“No one deserves this more than our military. I congratulate everyone, too,” he added.

Congress appropriated $2.9 billion in legislation enacted last July to supplement the basic housing allowance payable to uniformed service members, with one-time payments of $1,776 funded by that appropriation used, according to the IRS.

The supplemental payments are made primarily to active-duty service members in pay grades O-6 and below and eligible Reserve Component members across the Army, Air Force, Navy, Marine Corps and Space Force as of Nov. 30, 2025, the IRS said.

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President Trump celebrated the “reawakening of the warrior spirit” in the military in his speech at Marine Corps Base Quantico on September 30. (Jim Watson/Getty Images)

Pentagon press secretary Kingsley Wilson welcomed the tax treatment in his statements Pentagon NewsHe says the decision ensures the money reaches military families directly.

“The tax-free Warrior Dividend gives $1,776 directly to our warriors and their families,” Wilson said. “The Ministry is proud to recognize their sacrifice.”

In his December speech, Trump also pointed to what he described as a turnaround for the armed forces under his leadership, touching on the record recruitment number and comparing it to what he called historically poor recruiting numbers under the previous administration.

Secretary of War Pete Hegseth said the IRS news pointed to ‘what we are 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 effort to improve the quality of life for military families.

“This Warrior Dividend serves as 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 do is rebuilding our military.

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The War Department 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 report.