Title: Capital Improvement Definition
Headings: Capital Improvement
Capital Improvement
What Is a Capital Improvement?
Key Takeaways
How a Capital Improvement Works
Special Considerations
Cost Basis
Capital Gains
Local Exemptions
Examples of Capital Improvements

Content: Other IRS approved projects include adding new built-in appliances, wall-to-wall carpeting or flooring, or improvements to a home's exterior, such as replacing the roof, siding, or storm windows. Installing a fixed swimming pool or driveway may also be qualified capital improvements. The IRS, however, distinguishes between a capital improvement and a repair or replacement due to normal wear and tear. For example, if your refrigerator breaks after several years of service, or you have leaky pipe, those repairs are not capital improvements. However, if a person solar panels and a tool shed for his property, both of which are affixed permanently to the property, they would be considered capital improvements to the home. An example of a business-based capital improvement would be installing a new HVAC system or putting in Americans with Disability Act ( ADA) accessible features to an existing building. Similarly, the creation of a new public park in a downtown area would also be considered a capital improvement for a city. In these scenarios, the new additions would make the respective properties more valuable, would be considered permanent additions, and their removal would cause material harm to the property. Special Considerations
Cost Basis
The cost basis is the original cost of an asset. The IRS sets specific standards for an improvement to qualify as a cost-basis increase.