ByKelly Phillips Erb,
Forbes Staff.
The IRS has confirmed that the supplemental Basic Allowance for Housing (BAH) payments made to members of the military in December 2025 are not includable in gross income. As a result, service members who received these payments do not owe federal income tax on them. The IRS’ statement is intended to end confusion about whether the one-time payment—referred to as a “Warrior Dividend”—would be reported as wages and subject to tax.
In December, President Trump announced that approximately 1.45 million service members would receive a special payment before Christmas. The one-time payments of $1,776, which he referred to as Warrior Dividends, were issued primarily to active-duty members in pay grades O-6 and below, as well as eligible Reserve Component members serving as of November 30, 2025. Members of the Army, Air Force, Navy, Marine Corps, and Space Force were eligible under the program.
Although the payments were publicly described as “dividends,” they were not treated as bonus or incentive pay. Instead, they were administered through the military pay system as a supplemental housing allowance, putting them in the same category as other non-taxable military compensation. That internal classification—rather than the label used in public messaging—determines how the payments are taxed.
