Yes, this is taxable income.
These are considered to be “Differential Wage Payments.”
According to “Differential wage payments” on page 3 of IRS Publication 525, Taxable
and Nontaxable Income:
“This is any payment
made by an employer to an individual for any period during which the individual
is, for a period of more than 30 days, an active duty member of the uniformed
services and represents all or a portion of the wages the individual would have
received from the employer for that period. These payments are treated as wages
and are subject to income tax withholding, but not FICA or FUTA taxes. The
payments are reported as wages on Form W-2.”
