What does capital gains tax apply to?

Capital gains tax applies specifically to the profit resulting from the sale of an asset or investment when that asset is sold for more than its purchase price. This can include various types of assets such as stocks, real estate, or other investments. When an individual or entity sells an asset and realizes a gain, this profit is considered a capital gain and is subject to taxation under capital gains tax laws.

The context surrounding this tax is key, as it focuses on the appreciation of investments over time rather than regular income earned through employment or other forms of compensation. Therefore, while income from salaries, dividends, and business revenue play important roles in financial considerations, they are not subject to capital gains taxation. Instead, they are typically taxed as ordinary income or under different tax rules.