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Tax Cuts for Veterans Act of 2025
To amend the Internal Revenue Code of 1986 to exclude all military retirement and related benefits from Federal income tax.
Summary
This bill amends the Internal Revenue Code to exclude all military retirement pay and related benefits from federal income tax for members and former members of the armed forces and certain uniformed services. The bill expands the current tax treatment to exclude retired or retainer pay, disability compensation, pension, annuity, and allowance payments made under federal military law. The exclusion applies to payments received in connection with military service, disability, combat-related injury or disability, or death of a service member. The bill also makes conforming amendments to federal law and repeals an obsolete provision. The change would be effective for taxable years beginning after the bill's enactment, meaning military retirees would owe no federal income tax on their military retirement benefits.
AI-generated plain-language summary of the bill text — neutral, and may be imperfect. See the full text below for the exact wording.
Sponsor (1)
- Sen. Ricketts, Pete [R-NE] (R-NE)
2 cosponsors
- Sen. Gallego, Ruben [D-AZ] (D-AZ)
- Sen. Rosen, Jacky [D-NV] (D-NV)
Actions (2)
- Mar 25, 2025 Read twice and referred to the Committee on Finance. · senate
- Mar 25, 2025 Introduced in Senate
Similar bills (6)
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Full text
IN THE SENATE OF THE UNITED STATES
March 25, 2025
Mr. Ricketts (for himself and Ms. Rosen) introduced the following bill; which was read twice and referred to the Committee on Finance
A BILL
To amend the Internal Revenue Code of 1986 to exclude all military retirement and related benefits from Federal income tax.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the “Tax Cuts for Veterans Act of 2025”.
SEC. 2. EXCLUSION OF ALL MILITARY RETIREMENT AND RELATED BENEFITS.
(a) In General.—Section 122 of the Internal Revenue Code of 1986 is amended to read as follows:
“SEC. 122. CERTAIN UNIFORMED SERVICES RETIREMENT PAY AND RELATED BENEFITS.
“(a) General Rule.—In the case of a member or former member of the armed forces of the United States, gross income does not include—
“(1) any retired or retainer pay paid under title 10 or 14, United States Code, or
“(2) any amounts not described in section 104(a)(4) received as monthly compensation, pension, pay, annuity, or allowance paid under title 10, 14, 37, or 38, United States Code, in connection with a disability or combat-related injury or disability or death of a member of the armed forces.
“(b) Certain Reduced Uniformed Services Retirement Pay.—
“(1) In general.—In the case of a member or former member of the uniformed services of the United States other than a member or former member of the armed forces, gross income does not include the amount of any reduction in retired or retainer pay pursuant to the provisions of chapter 73 of title 10, United States Code.
“(2) Special rule.—
“(A) Amount excluded from gross income.—In the case of any individual referred to in paragraph (1), all amounts received as retired or retainer pay shall be excluded from gross income until there has been so excluded an amount equal to the consideration for the contract. The preceding sentence shall apply only to the extent that the amounts received would, but for such sentence, be includible in gross income.
“(B) Consideration for the contract.—For purposes of subparagraph (A) and section 72(n), the term ‘consideration for the contract’ means, in respect of any individual, the sum of—
“(i) the total amount of the reductions before January 1, 1966, in the individual’s retired or retainer pay by reason of an election under chapter 73 of title 10 of the United States Code, and
“(ii) any amounts deposited at any time by the individual pursuant to section 1438 or 1452(d) of such title 10.
“(c) Definitions.—For purposes of this section, the terms ‘armed forces’ and ‘uniformed services’ have the respective meanings given such terms by section 101 of title 10, United States Code.”.
(b) Conforming Amendments.—
(1) Conforming repeal.—
(A) In general.—Section 1403 of title 10, United States Code, is repealed.
(B) Clerical amendment.—The table of sections at the beginning of chapter 71 of such title is amended by striking the item relating to section 1403.
(2) Annuities.—Subsection (n) of section 72 of the Internal Revenue Code of 1986 is amended by striking “Subsection (b)” and inserting “In the case of any member or former member of the uniformed services of the United States other than a member or former member of the armed forces, subsection (b)”.
(c) Clerical Amendment.—The item relating to section 122 in the table of sections for part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended to read as follows:
“Sec. 122. Certain uniformed services retirement pay and related benefits.”.
(d) Effective Date.—The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act. <all>
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