Capital Improvement

Real Estate

Capital improvements are property modifications that add value, prolong useful life, or adapt to new uses — distinct from repairs (which restore but don't improve). Examples: room additions, new roof, HVAC replacement, kitchen remodel, finished basement. Capital improvements increase the property's cost basis, reducing taxable gain when sold. Track receipts and documentation for IRS verification. Capital improvements to rental properties depreciate over 5-27.5 years depending on classification. Distinguished from repairs (replace broken faucet, paint walls, fix roof leak) which are immediately deductible as expenses. The repair-vs-improvement distinction has significant tax implications; consult tax records and CPA.