S. 1856 would amend the tax code to allow military service members to exclude bonuses from their taxable income. Currently, military bonuses are treated as regular income subject to federal taxes, but this bill would make them tax-free, similar to other qualified military benefits already excluded from taxation. The change would apply to all active-duty and reserve service members who receive bonuses under federal law. The legislation would take effect starting with the 2025 tax year, meaning eligible service members could claim the exclusion on their 2025 tax returns and beyond. This tax break would reduce the federal government's tax revenue, though no specific cost estimate is provided in the bill text.
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