The Holiday Bonus Tax Relief Act would allow workers to exclude up to $2,500 in holiday bonuses from their taxable income each year. The exclusion applies to bonuses paid by employers during November, December, or January and would take effect for bonuses received after November 1, 2025. The $2,500 limit will automatically increase each year after 2026 based on inflation, rounded to the nearest $100. This change affects all employees who receive holiday or year-end bonuses from their employers. The bill requires the Treasury Department to issue regulations preventing employers from disguising regular wages as holiday bonuses to exploit the tax break.
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