The “Warrior Dividend” payments of $1,776 made to military service members in December 2025 definitely won’t be subject to income taxes, the IRS confirmed.
In a joint statement with the Department of Treasury, the IRS explained that the payments technically supplemented service members’ Basic Allowance for Housing since the money came from $2.9 billion in supplemental BAH funds that Congress approved in the One Big, Beautiful Bill, enacted in July 2025.
The “supplemental basic allowance for housing payments made to members of the uniformed services in December 2025 are not to be included in income by those who received the payments; they are not taxable,” according to the joint statement.
Read More: Pentagon Uses Military Housing Funds for $1,776 “Warrior Dividend”
Because normal BAH payments represent a “qualified military benefit,” they aren’t taxable. Therefore, the Warrior Dividend payments aren’t, either, according to the two departments.
President Donald Trump announced in December that 1.45 million service members would receive the $1,776 payments, framing them as a holiday gift tied to the nation’s 250th anniversary. Defense Secretary Pete Hegseth directed the Pentagon to disburse the money as a one-time basic allowance for housing supplement.
“The resulting one-time supplemental payments of $1,776 made primarily to active-duty members of the uniformed services in the pay grades of O-6 and below and eligible Reserve Component members as of Nov. 30, 2025, of the Army, Air Force, Navy, Marine Corps and Space Force were funded by this appropriation,” according to the IRS statement.
The Warrior Dividend also won’t count toward retirement calculations. It’s a stand-alone, one-time payment appearing as a separate line item on Leave and Earnings Statements.
Read More: Military Spouses: Here’s What to Remember About Filing State Taxes
“We are sending every soldier $1,776. Think of that. And the checks are already on the way,” Trump said during a prime-time address from the White House in which he announced the payments. “Nobody deserves it more than our military.”
Income Tax Webinar Set for Feb. 18
The Military Officers Association of America is hosting a webinar titled “What’s New for the Upcoming Tax Season” from 3 to 4 p.m. Eastern time Feb 18. Those who can’t attend may register to receive a link to the recording.
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