A capital gains tax is imposed on the profits realized when an investor or corporation sells an asset for a higher price than its purchase price. Capital gains taxes apply to anyone who sells an asset for profit.A capital gains tax is only paid when an asset is sold. The tax is not paid while the investor holds the asset, no matter how long it’s held. Laws pertaining to capital gains tax vary by country. In the United States, capital gains taxes are based each year on net capital gains. Say an investor sold one stock for a profit of $2,000, and then another stock for a $1,000 loss. The investor’s net capital gains tax would be imposed on the investor’s profit of $1,000. Home sales are usually not subject to capital gains taxes, up to a certain amount, if the same person owned the home for at least two years in the five years before the sale; it was the homeowner’s primary residence and the homeowner hasn’t excluded the gain from another home sale in the previous two years. If an investor sells an asset after owning it for less than a year, she’ll usually pay a higher capital gains tax. For investors who sell and buy items for a living, profits are taxed as business income, not capital gains.