Determining what qualifies as a capital improvement versus making a repair is important, considering they are calculated differently when filing taxes.

What is a Capital Improvement?

A capital improvement is the addition of a permanent structural change or the restoration of some aspect of a property that will either enhance the property's overall value, prolongs its useful life, or adapt it to new uses.

- Investopedia

Capital Improvement is an update to the property that will extend the “useful life” of the property and will add value for years to come. Typically, improvements are more expensive and extensive.

What is considered a repair?

A repair is typically restoring something to its previous “good” condition and is not improved upon. Repairs are usually considered general maintenance needed to keep property in working condition.

Capital Improvement VS Repair

Capital Improvement

• Building an Addition to the Property

• Installing Central Air Conditioning

• Replacing Entire Roof

• Renovating Kitchen|Bathroom

• Building a Deck

• Installing New Windows

Repair

• Refinishing Wood Floors

• Repainting Walls

• Repairing Roof

• Replacing a Window

• Repairing Existing Plumbing

• Repairing Existing Appliances

Prepping for Tax Season

Should you repair that current air conditioning unit or should you install Central Air Conditioning? When it comes time to improve or repair your asset, think about the cost|benefit analysis.

When preparing your taxes, you should always consult with the IRS and|or a certified accountant to decide what deductions are applicable to you and your specific situation.