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Title 26 — Internal Revenue CodeRelease 119-73

§122 Certain reduced uniformed services retirement pay

Title 26 › Subtitle Subtitle A— - Income Taxes › Chapter CHAPTER 1— - NORMAL TAXES AND SURTAXES › Subchapter Subchapter B— - Computation of Taxable Income › Part PART III— - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME › § 122

Last updated Apr 6, 2026|Official source

Summary

If a current or former member of the U.S. uniformed services had part of their retired or retainer pay reduced under chapter 73 of title 10, that reduced amount is not counted as gross income for tax purposes. Any retired or retainer pay they get can be excluded from gross income until the total excluded equals the "consideration for the contract" — meaning the total cuts made before January 1, 1966 because of an election under chapter 73 plus any amounts they deposited under 10 U.S.C. 1438 or 1452(d). This exclusion only applies to the portion that would otherwise be taxable.

Full Legal Text

Title 26, §122

Internal Revenue Code — Source: USLM XML via OLRC

(a)In the case of a member or former member of the uniformed services of the United States, gross income does not include the amount of any reduction in his retired or retainer pay pursuant to the provisions of chapter 73 of title 10, United States Code.
(b)(1)In the case of any individual referred to in subsection (a), 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.
(2)For purposes of paragraph (1) and section 72(n), the term “consideration for the contract” means, in respect of any individual, the sum of—
(A)the total amount of the reductions before January 1, 1966, in his retired or retainer pay by reason of an election under chapter 73 of title 10 of the United States Code, and
(B)any amounts deposited at any time by him pursuant to section 1438 or 1452(d) of such title 10.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

A prior section 122 was renumbered section 140 of this title.

Amendments

2014—Subsec. (b)(1). Pub. L. 113–295 struck out “after
December 31, 1965,” after “all amounts received”. 1974—Subsec. (a). Pub. L. 93–406, § 2007(a), substituted “United States, gross income does not include the amount of any reduction in his retired or retainer pay pursuant to the provisions of chapter 73 of title 10, United States Code” for “United States who has made an election under chapter 73 of title 10 of the United States Code to receive a reduced amount of retired or retainer pay, gross income does not include the amount of any reduction after
December 31, 1965, in his retired or retainer pay by reason of such election”. Subsec. (b)(2). Pub. L. 93–406, § 2005(c)(10), substituted “72(n)” for “72(o)”. Subsec. (b)(2)(B). Pub. L. 93–406, § 2007(b)(1), inserted reference to section 1452(d) of title 10.

Statutory Notes and Related Subsidiaries

Effective Date

of 2014 AmendmentAmendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a

Savings Provision

, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

Effective Date

of 1974 AmendmentAmendment by section 2005(c)(10) of Pub. L. 93–406 applicable only with respect to distributions or payments made after Dec. 31, 1973, in taxable years beginning after Dec. 31, 1973, see section 2005(d) of Pub. L. 93–406, set out as a note under section 402 of this title. Pub. L. 93–406, title II, § 2007(c), Sept. 2, 1974, 88 Stat. 993, provided that: “The

Amendments

made by this section [amending this section and section 72, 101, and 2039 of this title] apply to taxable years ending on or after September 21, 1972. The

Amendments

made by paragraphs (3) and (4) of subsection (b) [amending section 101 and 2039 of this title] apply with respect to individuals dying on or after such date”.

Effective Date

Pub. L. 89–365, § 1(d), Mar. 10, 1966, 80 Stat. 33, provided that: “The

Amendments

made by subsections (a) and (b) [enacting this section and amending section 72 of this title] shall apply with respect to taxable years ending after
December 31, 1965. The amendment made by subsection (c) [amending section 101 of this title] shall apply with respect to individuals making an election under chapter 73 of title 10 of the United States Code who die after
December 31, 1965.”

Reference

Citations & Metadata

Citation

26 U.S.C. § 122

Title 26 — Internal Revenue Code

Last Updated

Apr 6, 2026

Release point: 119-73