You’ve heard the term capital gains tax. But what is that exactly? Is that something you pay? If so, when? Whenever you sell something — a house, car, company stock, or even gold or silver coins — you typically either make or lose money on the investment. That’s also referred to as a gain or loss. In many circumstances, the item you sold is labeled as a capital asset. If you sell a capital asset and earn a profit from that sale, you are then subject to capital gains tax. To determine whether you have to pay capital gains tax, you first have to know whether your item is a capital asset. Capital asset definition Most personal items you own, such as a car, shares of stock, mutual funds, or real estate, are capital assets. According to the Internal Revenue Service (IRS), almost everything you own and use for personal purposes, pleasure, or investment is a capital asset. Businesses can own capital assets, too. Things like equipment, machinery, buildings, and patents are capital as...
