Bill Summary
The "Holiday Bonus Tax Relief Act of 2025" aims to amend the Internal Revenue Code to provide tax relief for employees receiving holiday bonuses. Specifically, it allows individuals to exclude up to $2,500 of qualified holiday bonuses from their gross income, which means these bonuses will not be subject to federal income tax.
Key provisions include:
1. **Definition of Qualified Holiday Bonus**: A holiday bonus is defined as any bonus paid by an employer during January, November, or December.
2. **Exclusion Limit**: The exclusion is capped at $2,500 per individual, with adjustments for inflation starting in 2027.
3. **Reporting Requirements**: Employers will be required to report the total amount of qualified holiday bonuses on employee W-2 forms.
4. **Effective Date**: The exclusion applies to bonuses received on or after November 1, 2025.
The legislation seeks to provide financial relief to employees during the holiday season by ensuring that these bonuses do not increase their taxable income.
Possible Impacts
The "Holiday Bonus Tax Relief Act of 2025" could affect people in several significant ways:
1. **Increased Disposable Income**: By excluding holiday bonuses from gross income up to $2,500, employees will have more disposable income. This could lead to increased consumer spending during the holiday season, benefiting local businesses and the economy as a whole. Employees may feel more financially secure and able to spend on gifts, travel, or other holiday-related expenses.
2. **Tax Savings**: Employees who receive holiday bonuses will not have to pay federal income taxes on up to $2,500 of these bonuses. This tax relief can result in considerable savings for individuals, allowing them to retain more of their earnings. For example, if an employee typically falls within a 22% tax bracket, they could save approximately $550 in taxes on a $2,500 bonus, which could be utilized for saving, investing, or spending on necessities.
3. **Employer Incentives**: Employers may be encouraged to offer holiday bonuses more freely, knowing that these bonuses can be provided without tax implications for employees. This could lead to improved employee morale and job satisfaction, as workers may feel more appreciated and valued. Additionally, businesses might see a reduction in payroll tax burdens, potentially allowing them to invest more in their workforce or other areas of their operations.
Overall, the legislation could enhance the financial well-being of employees while encouraging positive employer-employee relationships.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6872 Introduced in House (IH)]
<DOC>
119th CONGRESS
1st Session
H. R. 6872
To amend the Internal Revenue Code of 1986 to exclude holiday bonuses
from gross income, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
December 18, 2025
Mr. Mackenzie (for himself and Mr. Moskowitz) introduced the following
bill; which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to exclude holiday bonuses
from gross income, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Holiday Bonus Tax Relief Act of
2025''.
SEC. 2. EXCLUSION FROM GROSS INCOME OF HOLIDAY BONUSES.
(a) In General.--Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting after section
139L the following new section:
``SEC. 139M. QUALIFIED HOLIDAY BONUSES.
``(a) In General.--Gross income shall not include any qualified
holiday bonus.
``(b) Limitation.--
``(1) In general.--The amount which may be excluded under
subsection (a) with respect to any individual shall not exceed
$2,500.
``(2) Inflation adjustment.--In the case of any taxable
year beginning in a calendar year after 2026, the $2,500 amount
in paragraph (1) shall be increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins, determined by substituting
`calendar year 2025' for `calendar year 2016' in
subparagraph (A)(ii) thereof.
Any increase determined under the preceding sentence shall be
rounded to the nearest multiple of $100.
``(c) Qualified Holiday Bonus.--For purposes of this section, the
term `qualified holiday bonus' means, with respect to a taxable year,
any holiday, end-of-year, or similar bonus that is paid by an employer
to an employee during the month of January, November, or December of
such taxable year.
``(d) Regulations.--The Secretary shall prescribe such regulations
or other guidance as may be necessary to prevent reclassification of
income as a qualified holiday bonus, including regulations or other
guidance to prevent abuse of the exclusion allowed by this section.''.
(b) Qualified Holiday Bonuses Required To Be Shown on W-2.--Section
6051(a) of such Code is amended by striking ``and'' at the end of
paragraph (18), by striking the period at the end of paragraph (19) and
inserting ``, and'', and by inserting after paragraph (19) the
following new paragraph:
``(20) the total amount of qualified holiday bonuses (as
defined in section 139M(c)).''.
(c) Clerical Amendment.--The table of sections for part III of
subchapter B of chapter 1 of such Code is amended by inserting after
the item relating to section 139L the following new item:
``Sec. 139M. Qualified holiday bonuses.''.
(d) Effective Date.--The amendments made by this section shall
apply to bonuses received on or after November 1, 2025, in taxable
years ending after such date.
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