The FIGHTER Act of 2025 would exclude from federal gross income the “regular compensation” that active-duty members of the Armed Forces receive for their service, starting with taxable years after December 31, 2024. In other words, active-duty pay would be tax-free for federal income tax purposes. There is an important exception: if the individual receiving the compensation has served as a Member of Congress at any time during the 10-year period ending on the date of the compensation, that pay would not be exempt from income tax. The bill also requires changes to payroll withholding to reflect the exclusion, adds a new §139J to the Internal Revenue Code to codify the exclusion, and directs the government to offset the revenue loss with cost-saving measures implemented by a department humorously named the United States DOGE Service (Department of Government Efficiency). The act is intended to apply to tax years beginning after 2024 and would be introduced by Rep. Biggs of South Carolina.
Key Points
- 1Excludes regular compensation for active service by Armed Forces members from gross income (federal income tax) for tax purposes.
- 2Exception: the exclusion does not apply if the recipient served as a Member of Congress within the 10 years prior to receiving the compensation.
- 3Definitions:
- 4- Active service: as defined in section 101 of title 37, United States Code.
- 5- Regular compensation: as defined in section 101 of title 37, United States Code.
- 6- Member of Congress: Senator, Representative, Delegate, or Resident Commissioner.
- 7Regulatory and withholding changes: Treasury must adjust withholding tables and guidance so the tax exclusion is reflected in payroll withholdings.
- 8Clerical amendment: Adds new Sec. 139J to the Internal Revenue Code to codify the exclusion.
- 9Effective date: Applies to taxable years beginning after December 31, 2024 (i.e., starting with the 2025 tax year).
- 10Government efficiency offset: Section 3 requires the United States DOGE Service to implement cost-saving initiatives that at least offset the revenue loss from the tax exemption.
- 11Short title: The act may be cited as the Fortifying Income by Giving our Heroes Their Earned-Tax Relief Act of 2025 (FIGHTER Act of 2025).