H.R.2565 - No Tax on Bonuses Act of 2025 (119th Congress)
Summary
H.R.2565, the "No Tax on Bonuses Act of 2025," aims to amend the Internal Revenue Code of 1986 to exclude enlistment and reenlistment bonuses for members of the armed forces from gross income. The bill was introduced in the House of Representatives on April 1, 2025, and referred to the Committee on Ways and Means. The proposed change seeks to provide a tax exemption for bonuses paid to service members for enlisting, reenlisting, or extending their service commitments.
Expected Effects
If enacted, this bill would reduce the tax burden on members of the armed forces who receive enlistment or reenlistment bonuses. This could potentially increase military recruitment and retention rates. The change would apply to taxable years beginning after the date of enactment.
Potential Benefits
- Increased Military Recruitment and Retention: Tax-free bonuses may incentivize more individuals to enlist or reenlist.
- Improved Financial Well-being for Service Members: Service members would retain a larger portion of their bonus income.
- Enhanced Morale: Recognizing the sacrifices of military personnel through tax relief can boost morale.
- Simplified Tax Filing: Service members would not need to calculate and pay taxes on these specific bonuses.
- Potential Economic Stimulus: Increased disposable income for service members could lead to greater spending.
Potential Disadvantages
- Reduced Government Revenue: Excluding bonuses from gross income would decrease federal tax revenue.
- Potential for Abuse: The definition of "qualified bonus" needs to be carefully monitored to prevent misuse.
- Complexity in Tax Code: While simplifying for service members, it adds another layer to the overall tax code.
- Fairness Concerns: May create disparity between military personnel and other professions regarding taxable income.
- Budgetary Impact: The long-term financial impact of reduced tax revenue needs to be assessed.
Most Disadvantaged Areas:
Constitutional Alignment
The bill appears to align with the constitutional power granted to Congress in Article I, Section 8, to provide for the common defense and to raise and support armies. By incentivizing military service through tax exemptions, the bill supports these constitutional objectives. The bill does not appear to infringe upon any specific constitutional rights or limitations.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).