IRS announces new tax benefit that may give a boost to 1 million taxpayers— What is it? How does it work?
A special announcement by the Internal Revenue Service (IRS) of the US federal government is getting the attention of the taxpayers. With significant federal policy changes, tax regulations and costofliving adjustments starting in 2026, the IRS has affirmed a new relief provision. The US uniformed services will be able to offer close to one million individuals a special, one-time payment, which they will maintain without any federal tax bill.
This is a payment issued at the conclusion of 2025 itself which is now a confirmed payment to be tax-free by the IRS. The announcement has enabled service members and their families to reorganize their household finances in 2026 and budget their funds in the near future.
The new tax benefit of the IRS comes at the time when Americans are already struggling with the inflation pressures, an increase in interest rates and rising living expenses. As the cost of living in the households increases, the relief program should offer effective financial assistance to the qualified beneficiaries.
This is not a one-time initiative to them, especially to the qualified. In conjunction with the US Department of the Treasury, IRS has made it clear that the payment would not be taxed by the federal government. This implies that not only will the beneficiaries make the payment, but also they will not have to bear the cost of reporting in their tax returns later on in the year.
Announcement of tax benefit by the IRS What does it mean?
The financial increase was confirmed by the IRS on 16 January and is a one-time payment of $1,776 to be issued in December 2025.
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The IRS announced in its statement that the supplemental basic allowance of housing payment that should be made to the members of the uniformed services in December 2025 is not to be included in the income of the individuals who actually received the payment; it is not taxable. It implies that the beneficiaries are not required to claim the payment as income during 2025 or 2026.
This news is important since it means that the payment is non-taxable unlike a number of other federal benefits announced later who had to be accounted in the tax returns of the beneficiaries.
What is the working principle of the new IRS tax benefit?
This tax benefit of 1,776 IRS is included in the Warrior Dividend that the US President Donald Trump declared in December. In the One, Big, Beautiful Bill which was signed last July, the Congress allotted funds amounting to 2.9 billion to the basic allowance towards housing which members of the uniformed services receive. In December, President Donald J. Trump declared a special 1,450,000-service member military service personnel to receive a special 1,450,000-service member military service personnel Warrior Dividend before Christmas.
Due to the announcement of the IRS, the recipients will get the entire value of the payment, which will be issued and disbursed in December 2025 automatically via regular military pay systems.
The money was made available to the majority of the recipients through direct deposit together with regular pay, and other individuals could get it through the already existing military payment systems without needing to follow any further procedures.
Who is eligible?
The IRS states that the one-time tax-free payment of $1,776 is awarded to the active-duty members of the uniformed services in pay grades O-6 and below and to eligible members of the Reserve Component as of 30 November 2025, of the Army, Air Force, Navy, Marine Corps and Space Force.