What does capital improvement refer to?

Capital improvement refers to upgrades and enhancements made to a property that increase its overall value, extend its useful life, or adapt it to new uses. Such improvements often involve significant expenditures and improve the functionality or aesthetic appeal of the property, reflecting a strategic investment rather than ordinary upkeep.

These enhancements can include renovations, exterior refurbishments, installation of new features, and other forms of construction that go beyond routine repair and maintenance. The goal of capital improvements is not just to maintain the property but to elevate its market value and usability, which distinguishes them from routine repair and maintenance, which simply address wear and tear without increasing value.

Understanding this distinction is crucial in recognizing how different types of expenditures impact the financial health and value proposition of a property.