Plan would make military enlistment, retention bonuses tax exempt

Military enlistment and retention bonuses would be exempt from federal taxes under a proposal unveiled this week, a move that could put thousands of dollars into the wallets of eligible service members.

The legislation — sponsored by Army veteran Rep. Brian Mast, R-Fla. — would apply to enlistment, re-enlistment and other incentive bonuses. Those can range from a few hundred dollars to tens of thousands in extra cash.

Many of those bonuses are currently taxed at a rate of 20% or more, blunting some of the impact of the financial windfalls for military families. Troops deployed to combat zones who receive bonuses are not subject to federal taxes, but individuals stationed elsewhere are.

“Military servicemembers raise their right hands to defend our country, and in return, they deserve to keep every cent of the bonus they earn,” Mast said in a statement.

“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.”

Whether the measure can become law is unclear. Mast’s office did not release an estimate of the potential cost of the measure, but the loss of tax revenue could play a factor in congressional efforts to craft the annual appropriations bill.

The measure also could be attached to the annual defense authorization bill, currently being crafted behind the scenes by House Armed Services Committee members. That legislation includes a host of pay and benefits renewals each year.

Junior enlisted troops this month received a 10% boost in their base pay as part of congressional efforts to improve quality of life for younger military families. All troops were given a 4.5% pay raise at the start of 2025, the third consecutive year of pay hikes above 4% for the military.

Several other military specialty pays and allowances — including housing stipends and the Basic Allowance for Subsistence — are tax exempt.