Definition
Major improvements that add value, extend useful life, or adapt property for new use, adding to cost basis.
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Capital improvements (roof, HVAC, additions) increase cost basis. Differ from repairs (maintenance) that don't increase basis. Critical distinction for tax purposes.
Pro Tip
Document all improvements with receipts and photos; critical for cost basis calculations later.
Example
New roof ($15,000) and electrical system upgrade ($8,000) are capital improvements increasing cost basis.