Biden to propose 43.3% capital gains tax on people who make over $1 million: Here's how the headlines can affect your money

Markets slipped after reports that President Joe Biden plans to propose a higher capital gains tax on ultra-wealthy investors. Plus, new legislation could make college tuition-free for many Americans. Here's how the headlines could affect your money. 

All three major indexes slid Thursday on reports that Biden will propose raising capital gains taxes. The Dow dropped 1%, and the Nasdaq and S&P 500 both shed 0.9%. Friday morning, markets resumed their climb.

The president is expected to propose an increase to the capital gains tax to help fund forthcoming infrastructure bills, according to a Bloomberg report. Under the proposal, which Biden is expected to release next week, Americans earning more than $1 million a year could pay as much as 43.4% on their gains when they sell stocks and other investments. 

The plan would reportedly hike the top capital gains rate for those investors to 39.6% from its current 20%. The 3.8% Medicare tax on high earners' net investment income would remain in place.

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Sen. Bernie Sanders, I-VT, and Rep. Pramila Jayapal, D-WA, have proposed a bill that would make community college free and make four-year public college tuition-free and debt-free for students of families earning $125,000 or less. 

This bill is more likely to pass than it would have been in previous sessions of Congress, experts say. Still, they warn, don't make decisions based on legislation that hasn't been passed.

If you already have student debt, Biden is in support of forgiving $10,000 per borrower. The president also recently asked the Education Secretary for a report on whether he has the legal authority to forgive $50,000 per borrower.

When you sell an investment for more than you paid for it, the difference is capital gains. Capital gains taxes on that profit depend on the kind of asset and how long you have held it.

If you sell an investment at a loss, you can use those capital losses to offset capital gains and reduce your tax bill.

Although the daily news can have an impact on your wallet, remember to take a long-term outlook when it comes to decisions on spending, saving, and investing.

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