Capital assets are tangible property that is likely to remain in the possession of the owner for an extended period time. Generally, these more or less permanent assets are used to provide permanent housing for the owner, or are utilized as part of a revenue generating process, such as the operation of a business.

A capital asset includes a wide range of assets that are considered to be desirable and of immediate use or worth to the owner. The assets are also expected to be in use for a long period of time. Most often, a capital asset is thought of as an asset that can be touched and used daily. Land and buildings are excellent examples of a capital asset. Real estate in general, from residential dwellings to commercial office buildings or manufacturing plants, would all qualify as a capital asset.

Along with buildings and land, a capital asset can also be any type of equipment that is used in the operation of a business. Machinery that is used in a manufacturing plant would be considered a tangible asset. A delivery vehicle also qualifies as a capital asset, since it is used to transport finished goods to the point of sale. Computer equipment, office furniture, and general office machinery would all meet the working definition of a capital asset, as they are all assets that are anticipated to be in use by the owner for a considerable amount of time, and aid in the process of running a business.

Investments can also qualify as a capital asset. Choosing to invest resources into a subsidiary company is one example. Infusing cash or other resources into the operation is expected to entail a long-term commitment, and hopefully will produce revenue for the investor at some point in the operation.

A capital asset is subject to a specific set of tax rules. Federal and state level regulations regarding capital gains and capital losses are applied on a consistent basis to any resource that is identified as a capital asset. This mixture of applying taxes to both capital gains and losses allows business owners to gain tax credits as the capital asset ages and becomes less valuable by allowing depreciation and eventually declaring the asset to be obsolete and eligible for replacement.