Bill Summary
This legislation proposes an amendment to the Internal Revenue Code of 1986, specifically targeting the taxation of military bonuses. The key provision of the bill is the exclusion of bonuses paid to members of the uniformed services from gross income for tax purposes. By amending subsection (a) of section 134, it specifically identifies bonuses under chapter 5 of title 37 of the United States Code as non-taxable income. The effective date for this change is set for taxable years beginning after December 31, 2024, meaning that any bonuses received after this date would not be subject to federal income tax. This legislation aims to provide financial relief to military personnel by ensuring that their additional compensation does not increase their taxable income.
Possible Impacts
Here are three examples of how the proposed legislation to exclude military bonuses from gross income could affect people:
1. **Increased Take-Home Pay for Service Members**: By excluding military bonuses from gross income, service members would have a higher disposable income since these bonuses would not be subject to federal income tax. This could improve their financial situation, allowing them to save more, invest, or spend on necessities and discretionary items, thus enhancing their overall quality of life.
2. **Encouragement for Recruitment and Retention**: The legislation may positively impact recruitment and retention rates within the military. By making military bonuses tax-exempt, the overall compensation package for service members becomes more attractive. This could help the military attract new recruits and retain existing personnel, which is crucial for maintaining a strong defense force.
3. **Potential Impact on State Income Taxes**: While the federal tax change would exempt military bonuses from gross income, it may also influence state tax policies. Some states base their income tax calculations on federal adjusted gross income. If states follow suit and exclude military bonuses from taxable income, service members could see even greater tax savings. However, if states do not adopt similar measures, it could lead to inconsistencies in tax burdens for service members depending on their state of residence.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 1856 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 1856
To amend the Internal Revenue Code of 1986 to exclude military bonuses
from gross income.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
May 22, 2025
Mr. Blumenthal introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to exclude military bonuses
from gross income.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. EXCLUSION OF MILITARY BONUSES.
(a) In General.--Subsection (a) of section 134 of the Internal
Revenue Code of 1986 is amended by striking ``any qualified military
benefit'' and inserting ``any bonus paid to a member of the uniformed
services under chapter 5 of title 37, United States Code, or any
qualified military benefit''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2024.
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