To amend the Internal Revenue Code of 1986 to exclude from gross income the earnings from certain overseas deployments of members of the Armed Forces.
Summary
What This Bill Does
This tax bill expands section 112 of the Internal Revenue Code, which currently excludes certain combat-zone compensation from gross income. It adds a new overseas service category to the exclusion for enlisted members, warrant officers, and commissioned officers, renames the section to cover combat-zone and overseas service, defines overseas as any area outside the United States, defines United States to include territories and possessions, and excludes service during any month or part of a month when the taxpayer is overseas under permanent change-of-station orders. The amendments apply to taxable years beginning after December 31, 2025.
Who Benefits and How
Service members temporarily deployed overseas benefit because qualifying military pay can be excluded from gross income, increasing after-tax income. Military families benefit when a deployed member's federal tax bill falls for eligible months. Defense finance offices and tax preparers benefit from statutory definitions of overseas, United States, and permanent-change-of-station exclusions.
Who Bears the Burden and How
Treasury and IRS administrators must update tax forms, instructions, withholding guidance, and audit rules for the new exclusion. Defense Finance and Accounting Service payroll staff must identify eligible overseas deployment months and exclude permanent-change-of-station periods. Federal taxpayers and the Treasury bear revenue losses from excluding more military pay from gross income. Service members and preparers must document deployment status correctly to comply with the exclusion.
Key Provisions
- Amends section 112 to add overseas service to the combat-zone income exclusion.
- Provides that overseas means any area outside the United States.
- Requires permanent-change-of-station months or partial months to be excluded from the new overseas-service category.
- Provides that United States includes territories and possessions.
- Extends the exclusion expansion to taxable years beginning after December 31, 2025.
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
Expands the Internal Revenue Code section 112 combat-zone income exclusion so service members can exclude qualifying pay for months served overseas outside the United States, except months or partial months overseas under permanent change-of-station orders, for taxable years beginning after December 31, 2025.
Key Policy Areas
Tax, Defense, Veterans
Primary Purpose
Expands the Internal Revenue Code section 112 combat-zone income exclusion so service members can exclude qualifying pay for months served overseas outside the United States, except months or partial months overseas under permanent change-of-station orders, for taxable years beginning after December 31, 2025.
Policy Domains
Substantive provisions
Identified Gains
- Temporarily deployed service members
- Military families
- Defense finance offices
- Military tax preparers
Identified Costs
- Treasury tax administrators
- IRS forms staff
- Defense Finance and Accounting Service payroll staff
- Federal taxpayers
- Service members claiming the exclusion
Sponsors
Legislative Progress
In CommitteeMr. Rogers of Alabama introduced the following bill; which was …
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.
Defense payroll staff, Temporarily deployed service members
Positive-direction: Temporarily deployed service members
Negative-direction: Defense payroll 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