Capital Improvement

What Is a Capital Improvement?

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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.

Individuals, businesses, and cities can make capital improvements to the property they own.

Often capital improvements are given favorable tax treatment and may be exempted from sales tax in certain jurisdictions.

Capital improvements typically increase the market value of a property but may also expand the usefulness of the asset beyond its current state. To qualify as a capital improvement, it must endure for more than one year upon its completion and be durable or permanent in nature.

Although the scale of a capital improvement can vary, both individual homeowners and large-scale property owners make capital improvements.

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