A new proposal in Congress—part of the so-called One Big Beautiful Bill—aims to exempt tips and overtime pay from federal income tax starting in 2025. This temporary tax break would apply to workers earning less than $160,000 annually, offering the potential for thousands of dollars in extra take-home pay.

But there’s more to the story. While the change could benefit service workers, nurses, and hourly employees logging extra hours, it also raises questions about how it might affect Social Security contributions, eligibility for tax credits, and employer wage practices.

In this video, Kristy breaks down who qualifies, how long the exemption would last, and the arguments for and against the change—so you can plan ahead and understand how it may impact your 2025 tax return.