Section 1 Short title
This Act may be cited as the “No Tax on Bonuses Act of 2025”.
No Tax on Bonuses Act of 2025
A BILL
To amend the Internal Revenue Code of 1986 to exclude enlistment and reenlistment bonuses for members of the armed forces from gross income.
Sec. 2 Exclusion from gross income of enlistment and reenlistment bonuses for members of the armed forces
In general— Section 112 of the Internal Revenue Code of 1986 is amended by redesignating subsections (c) and (d) as subsections (d) and (e), respectively, and by inserting after subsection (b) the following new subsection:
“(c) Qualified bonus—Gross income does not include a qualified bonus.”
Qualified bonus defined— Section 112(d) of such Code, as redesignated by subsection (a), is amended by adding at the end the following new paragraph:
“(6) Qualified bonus
“(A) In general—The term qualified bonus means an enlistment, accession, reenlistment, retention, incentive, or other bonus paid by the Secretary concerned to a member of the Armed Forces of the United States in exchange for the agreement of the member to accept a commission as an officer, extend an active service commitment as an officer, enlist, reenlist, or extend an enlistment as an enlisted member in an active or reserve component, or enter into a reserve affiliation agreement.
“(B) Other definitions—For purposes of subparagraph (A), the terms active service, enlisted member, officer, and Secretary concerned have the meanings given to such terms in section 101 of title 10, United States Code.”
Conforming amendments—
Section 2201 of such Code is amended by striking “section 112(c)” both places it appears and inserting “section 112(d)”.
The heading for section 112 of such Code is amended by inserting “and other” before “compensation”.
Section 3401(a)(1) of such Code is amended by inserting “and other” before “compensation”.
The table of sections for part III of subchapter B of chapter 1 of such Code is amended by striking the item relating to section 112 and inserting the following new item:
Effective date— The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.