While investing, understanding capital gains tax is imperative, as it affects how much tax you owe when you sell assets for a profit. Capital gains tax applies primarily to the gains made from selling physical assets like real estate or financial investments, like stocks, at a higher price than what you originally paid. By grasping this tax’s implications, you can make informed investment decisions and better plan your financial future.

What Are Unrealized Capital Gains?

Even though you may not have sold an asset, its value can still increase, resulting in what is known as unrealized capital gains. This concept reflects the potential profit you could realize if you were to sell the asset. Currently, these gains are not taxed until the asset is sold, but proposals like those backed by Vice President Kamala Harris aim to change that for the ultra-wealthy.