What is the difference between a capital gains tax and an income tax?

A capital gains tax is levied on the profit made from the sale of an asset, such as stocks or real estate, when the asset is sold for more than its purchase price. In contrast, an income tax is applied to earnings from various sources, including wages, salaries, and interest, based on an individual's or entity's overall income. The rates and regulations governing these taxes can differ significantly, with capital gains often having lower rates for long-term investments. Essentially, capital gains tax focuses on investment profits, while income tax targets earnings from labor and other income sources.