Holiday Bonus Tax Relief Act of 2025
Summary
What This Bill Does
The bill creates Internal Revenue Code section 139M so employees can exclude qualified holiday bonuses from gross income up to 2,500 dollars per year. The cap is indexed for inflation after 2026 and rounded to the nearest 100 dollars. A qualified bonus must be a holiday, end-of-year, or similar employer-paid bonus during January, November, or December. Employers must report total qualified holiday bonuses on Form W-2, and Treasury must issue regulations or guidance to prevent employers or employees from reclassifying regular wages as holiday bonuses. The exclusion applies to bonuses received on or after November 1, 2025 in taxable years ending after that date.
Who Benefits and How
Employees receiving holiday bonuses benefit by keeping more bonus income tax-free, and employers benefit because a year-end bonus becomes a more attractive compensation tool for retention or morale without increasing the gross bonus amount.
Who Bears the Burden and How
The Treasury Department, IRS exam staff, payroll departments, and federal taxpayers must comply with W-2 reporting, anti-abuse regulations, enforcement of reclassification rules, and the revenue loss from excluding bonus income.
Key Provisions
- Creates a gross-income exclusion for qualified holiday bonuses up to 2,500 dollars per employee.
- Provides inflation adjustment for the cap after 2026 and rounds increases to the nearest 100 dollars.
- Requires employers to report qualified holiday bonus totals on W-2 forms.
- Directs Treasury to issue anti-abuse guidance preventing wage reclassification.
Evidence Chain:
This summary is generated from the full bill text using AI analysis. Expand "Detailed Analysis" below for identified beneficiaries/burden bearers with clause-level evidence links.
At a Glance
What This Bill Does
Excludes up to 2,500 dollars of qualified holiday, end-of-year, or similar bonuses from employee gross income, indexes the cap after 2026, and requires W-2 reporting plus Treasury anti-abuse guidance.
Key Policy Areas
Taxpayers, Labor, Government, Small Business
Primary Purpose
Excludes up to 2,500 dollars of qualified holiday, end-of-year, or similar bonuses from employee gross income, indexes the cap after 2026, and requires W-2 reporting plus Treasury anti-abuse guidance.
Policy Domains
Substantive provisions
Identified Gains
- Employees receiving holiday bonuses
- Employers paying year-end bonuses
- Payroll service providers
Identified Costs
- Treasury Department tax policy staff
- IRS exam staff
- Payroll departments
- Federal taxpayers
Sponsors
Legislative Progress
In CommitteeMr. Mackenzie (for himself and Mr. Moskowitz) introduced the following …
Referred to the House Committee on Ways and Means.
Introduced in House
Stakeholder Effects
cui bono?How this legislation distributes effects. Mention counts reflect frequency, not effect magnitude.
Employees receiving holiday bonuses, Employers paying year-end bonuses
IRS exam staff, Treasury Department tax policy staff
Bill Structure & Actor Mappings
Who is "The Secretary" in each section?
We use a combination of our own taxonomy and classification in addition to large language models to assess meaning and potential beneficiaries. High confidence means strong textual evidence. Always verify with the original bill text.
Learn more about our methodology