Capital Improvement

A permanent structural change or restoration that increases a property's value, extends its useful life, or adapts it to new uses. New roof, HVAC replacement, kitchen renovation, adding a bathroom, or replacing all windows. Capital improvements are depreciated over their useful life, not expensed in the year they are completed. A $7,000 HVAC replacement depreciates over 27.5 years. Keep detailed records for tax purposes.