The IRS and the Pentagon said on Jan. 16 that a “warrior dividend” announced by the Trump administration in December 2025 for soldiers will not be taxed, affecting more than 1 million service members.

“The Department of the Treasury and the Internal Revenue Service today confirmed that 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,” the IRS said in a statement.

The IRS cited U.S. tax law provisions that exclude a “qualified military benefit” from taxes, saying that the dividend falls under that provision and noting that the “basic allowance for housing payments are qualified military benefits and, therefore, are not taxable.”

“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,” the IRS statement reads, referring to the One Big Beautiful Bill Act that was signed by President Donald Trump last year.

According to the statement, the legislation allowed Congress to appropriate $2.9 billion to supplement the allowance for housing that can be paid to members of the U.S. military.

The decision by the IRS was hailed by the Department of War.

“The tax-free Warrior Dividend places $1,776 directly in the hands of our warfighters and their families,” Pentagon press secretary Kingsley Wilson said in a statement in response to the IRS announcement. “The department is proud to recognize their sacrifice.”

The dividend was announced by Trump during a speech on Dec. 17. He said it would be sent to 1.45 million service members before Christmas 2025.

“A warrior dividend in honor of our nation’s founding in 1776,” he said. “We are sending every soldier $1,776. ... Nobody deserves it more than our military, and I say congratulations to everybody.”

Government figures show that the entire U.S. military had about 1.3 million active service members and a total of 2.6 million service members, including National Guardsmen and civilian personnel, as of Sept. 30, 2025.

The dividend announcement came as the administration has pivoted to the economy in its messaging in recent weeks. Trump, Treasury Secretary Scott Bessent, and other White House officials have sought to highlight various tax provisions under the One Big Beautiful Bill Act that are going into effect in 2026 and that they say will benefit a large number of Americans.

Trump last week highlighted his administration’s focus on boosting domestic manufacturing through his tariff policies while touring a Ford production plant in Detroit.

“One of the biggest reasons for this unbelievable success has been our historic use of tariffs,” Trump told a crowd on Jan. 13.

He also said, “Every prediction the critics made about our tariffs policy has failed to materialize.”

In the same speech, Trump suggested that critics of tariffs are tacitly supporting the Chinese Communist Party, saying that “an anti-tariff person is a pro-Chinese person.”

Democrats in Congress have largely been critical of Trump’s policies, including his tariffs, and have said he has triggered what they have called an “affordability crisis” in the United States. In a speech on the Senate floor on Jan. 15, Senate Minority Leader Chuck Schumer (D-N.Y.) told senators that his party will focus heavily on economic issues ahead of the midterm elections in November.