Overview
- Treasury and the IRS confirmed on Jan. 20 that the December 2025 payments are excluded from income because they were processed as supplemental Basic Allowance for Housing.
- DFAS listed the payment under Entitlements on December Leave and Earnings Statements, it did not raise taxable wages, and it will not appear in W-2 Box 1.
- About 1.45 million service members—primarily active-duty O-6 and below plus eligible reservists across the Army, Navy, Air Force, Marine Corps, and Space Force—received $1,776 each.
- The one-time distribution was financed with roughly $2.6 billion from the One Big Beautiful Bill Act’s $2.9 billion supplemental BAH funding.
- Using the housing allowance funds reduces flexibility to cover potential cost spikes this fiscal year and could prompt tighter appropriations language or oversight from Congress.