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.

(a) Enlisted personnel. Section 112(a) of the Internal Revenue Code of 1986 is amended by striking or at the end of paragraph (1), by striking the period at the end of paragraph (2) and inserting , or, and by inserting after paragraph (2) the following new paragraph:

(3) served overseas.

(b) Commissioned officers. Section 112(b) of such Code is amended by striking or at the end of paragraph (1), by striking the period at the end of paragraph (2) and inserting , or, and by inserting after paragraph (2) the following new paragraph:

(3) served overseas.

(c) Definitions added. Section 112(c) of such Code is amended by adding at the end the following new paragraphs:

(6) The term overseas means any area outside the United States.

(7) The term served overseas does not include service during any month or portion thereof during which the taxpayer is overseas pursuant to permanent change of station orders.

(8) The term United States includes the territories and possessions of the United States.

(d) Conforming amendments

(1) The heading of section 112 of such Code is amended by inserting and overseas after combat zone.

(2) The table of sections for part III of subchapter B of chapter 1 of such Code is amended by striking the item relating to section 112 and inserting the following: Sec. 112. Certain combat zone and overseas compensation of members of the Armed Forces.

(e) Effective date. The amendments made by this section shall apply to taxable years beginning after December 31, 2025.