A capital improvement is a permanent structural change or restoration of some aspect of a property that will enhance the property’s value, increase its useful life or adapt it to new uses. This type of improvement must have a life expectancy of more than one year, and both individual homeowners and large-scale developers can make capital improvements. Examples of a capital improvement include adding a bedroom, bathroom or deck, adding new appliances, changing the flooring of a house, or replacing the roof. A capital improvement must also come part of the property permanently, so that removal of it would cause significant damage to the property itself.
There is a distinction between capital improvements and repairs. Repairs that are necessary to keep a home in good condition are not considered capital improvements as they do not add value. Examples of such repairs are painting, fixing leaks, replacing broken hardware, or routine system maintenance. If repairs are done as part of a larger project, such as replacing all of a home’s windows, then they might be considered capital improvements and can be used to list extra value on your home.
Capital improvements are not limited to individual home projects, cities can also develop capital improvements. The creation of a new public park or downtown area are capital improvements for cities. In a city scenario, the new additions make properties in the city more valuable or increase its market value.