New bill seeks to exempt all military bonuses from federal taxes

A bipartisan group of lawmakers is pushing to exempt all military bonuses from federal income tax — a move that would allow service members to keep their full bonus pay. 

The legislation, dubbed as the BONUS act, seeks to amend a section of the Internal Revenue Code of 1986 to “explicitly exclude any bonus paid to a member of the uniformed services.”

If passed, the bill would apply to military bonuses earned after December 31, 2024.

Currently, service members deployed to combat zones receive tax-free income, but the new legislation would expand that tax relief to include enlistment, reenlistment and performance bonuses.

Reps. Jen Kiggans (R-Va.) and Sanford Bishop (D-Ga.), who lead the Congressional House Military Family Caucus, introduced the bill this week. 

“Our service members put their lives on the line and often work in extreme conditions to train and defend our county,” Bishop said in a statement. “One way we can thank these hard-working men and women and encourage talent to continue serving is by providing a small bonus or incentive pay. This bill would exempt these bonuses from federal income tax and allow our servicemembers and their families to keep more of their hard-earned pay. The BONUS Act is a show of respect for the sacrifices they make on behalf of all Americans.”

Rep. Brian Mast (R-Fla.) introduced a similar bill in April to exempt all military bonuses from federal taxes. Sen. Richard Blumenthal (D-Conn.) has introduced the same bill in the Senate.

“Military service members raise their right hands to defend our country, and in return, they deserve to keep every cent of the bonus they earn. This bill removes the unfair tax burden that has long affected military bonuses and keeps hard-earned money in the pockets of our soldiers, sailors, Airmen, Marines, and Guardians,” Mast said. 

The bill’s bipartisan sponsorship improves its chances in the closely divided House and Senate, where standalone bills often face political hurdles. It is also common for lawmakers to attach such proposals to larger legislative packages like the annual National Defense Authorization Act to increase their chances, but it is unclear what strategy the lawmakers are pursuing for the BONUS Act. 

Enlistment bonuses can range from a few thousand dollars to tens of thousands of dollars, particularly for high-demand roles, and they can be paid in lump sums or over time, depending on service branch policies.

Military bonuses are often used as tools to address recruiting and retention challenges across the services — in recent years, the Pentagon has expanded bonus offerings in response to its long-standing recruiting shortfalls. Meanwhile, lawmakers have been working to address service member’s quality of life issues — Congress recently approved a historic pay raise for enlisted service members. 

“The bill builds on existing tax exclusions for certain military benefits and responds to long-standing concerns raised by troops, families and advocates who believe those who serve should not be taxed on the bonuses they earn in service to our country,” Kiggans said in a press release. “The BONUS Act addresses this unfair burden and ensures that the financial rewards meant to strengthen our force actually reach the men and women who’ve earned them.”

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