Read is the verb for taking in written words, or a noun for a book worth reading, while red is simply the colour. The confusion comes from pronunciation: in the past tense, "I read that book" is said exactly like the colour red. If you mean the colour, it is always red; if you mean the act of reading, it is read, however it is said.
The core difference
Read is about understanding written words; red is a colour, and only the past tense of read sounds like it.
- read — to look at written words and understand them: he read the instructions before assembling the shelf.
- red — the colour of blood or a stop light: the sunset turned the sky a deep red.
How to tell them apart
Unlike most confused pairs, read and red are only homophones some of the time. Present-tense read rhymes with need ("I read every day"), but past-tense read is pronounced exactly like the colour red ("I read that book last year"). That shared sound in the past tense is what causes the odd spelling slip, even though red itself is never a verb.
A simple check: if you can swap in another colour, such as blue or green, and the sentence still makes sense, you want red. If the sentence is about books, letters, or understanding something written, you want read, no matter how it sounds out loud.