Capital Improvement Vs. Repairs
Capital Improvement Versus Repairs
When it comes to tax implications, all home improvement project costs fall into one of two categories: capital improvements or repairs. Understanding the differences is important for ensuring compliance with tax regulations and making informed decisions about what home improvement projects to prioritize.
Capital Improvement
A Capital Improvement Is Considered To Be Any Upgrade Or Modification That:
- Adds substantial value
- Is not done out of necessity
- Prolongs the life of the home
- Improves functionality
- Is a permanent/semi-permanent fixture
Examples may include, but are not limited to:
- Additions
- Additions
- New gutter guards
- New windows
- New roof
- New electrical system or generator
- New central air conditioning/heating system
- Energy-efficient outdoor lighting
- Extra water heater
- Home security system
- New septic system
- New plumbing system
- New driveway
- Solar panel installation
- New deck
- Kitchen renovation
- Bathroom renovation
- New flooring
Repair
A Repair Is Considered To Be Any Modification That:
- Restores something to its original working condition
- Does not improve upon its condition beyond the work that was done
- Doesn’t increase overall value of the home
Examples may include, but are not limited to:
- Gutter repairs
- Painting
- Window pane replacement
- Repairing leaking faucets
- Replacing broken roof shingles
- Replacing worn carpeting
- Refinishing wood floors
- Patching driveway cracks
- Replacing smoke detectors
- Replacing a doorknob
- Replacing cracked tiles
- Replacing window screens
- Soft wash and power wash
- Repair of deck boards/railings
- Repairing masonry work
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