What is Capital Gains Tax?

FAQ: What is a capital gains tax?

Answer: A capital gains tax is a tax levied on capital gains – any profits you as an investor make when you sell an asset for a price that is higher than the price you purchased it.

It’s important to note that, capital gains taxes are only triggered when you sell the asset and “realize” a profit, and not while you are holding the asset as an unrealized gain.

For example, you can own shares that go up in value every year, but you do not need to pay a capital gains tax on the shares until you sell them.