Capital improvements are changes made to property that add to its value, prolong its useful life, or adapts it to new uses. When you make a capital improvement, the cost of the project is added to the property’s cost basis. The property’s cost basis is, essentially, the price it was purchased for plus the cost of capital improvements. This figure becomes important when the time comes to sell the property. It’s important to document capital improvements because doing so may help property owners avoid paying some capital gains tax when they sell the property.
Our Capital Improvements Worksheet was created to help you identify and track your capital improvement costs.
