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: 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. A primary concern is it must be in place at the time a property is sold. A capital improvement must also become part of the property—or be affixed so permanently to the property—that the removal of it would cause significant damage or decrease in the value of the property itself. Repairs or maintenance cannot be included in a property's cost basis. However, repairs that are part of a larger project, such as replacing all of a home's windows, do qualify as capital improvements. Renovations that are necessary to keep a home in good condition are not included if they do not add value to the asset.