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

The Internal Revenue Service (IRS) announced good news for U.S. 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 bonus dollar.

In a statement released Friday, the Treasury Department and the IRS said the “additional basic allowance for housing payments” paid to members of the uniformed forces in December 2025 “should not be included in the income of those who received the payments; they are not taxable.”

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

The confirmation caps President Donald Trump’s announcement before Christmas that nearly 1.5 million U.S. service members would receive a special “warrior’s dividend” in recognition of their service and to commemorate approximately 250 years since the founding of the nation.

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President Donald Trump and Secretary of War Pete Hegseth listen during a Cabinet meeting at the White House in Washington, DC (Andrew Caballero-Reynolds/AFP via Getty Images)

“And the checks are already underway,” Trump said during a Dec. 17, 2025, prime-time speech at the White House, crediting recently passed Republican Party tariffs and spending and tax legislation to fund the payments.

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

According to the IRS, Congress appropriated $2.9 billion in legislation passed last July to supplement the basic housing allowance payable to members of the uniformed forces, with the one-time payments of $1,776 being funded by this appropriation.

The IRS said the additional payments were made primarily to active-duty military members in pay grades O-6 and below, as well as eligible reserve component members beginning Nov. 30, 2025, in the Army, Air Force, Navy, Marine Corps and Space Force.

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President Trump celebrates “the awakening of the warrior spirit” within the military during a Sept. 30 speech at Marine Corps Base Quantico. (Jim Watson/Getty Images)

Pentagon press secretary Kingsley Wilson praised the tax treatment in remarks published by Pentagon News, saying the decision ensures that money goes directly to military families.

“The tax-free Warrior Dividend places $1,776 directly in the hands of our warfighters and their families,” Wilson said. “The department is proud to recognize their sacrifice.”

During his December speech, Trump also highlighted what he described as a turnaround for the armed forces under his leadership, citing a record enlistment rate and comparing it to what he called historically low recruiting numbers under the previous administration.

War Secretary Pete Hegseth said the IRS news highlights “what we are doing to rebuild our military.” (Alex Wong/Getty Images)

“What a difference in one year,” Trump said.

Secretary of War Pete Hegseth said the dividend reflects a broader drive to improve the quality of life for military families.

“This Warrior Dividend is yet another example of how the Department of War is working to improve the quality of life for our service members and their families,” Hegseth said. “Every element of what we do is aimed at 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.

Alec Schemmel of Fox News Digital contributed to this report.