What You Should Know About Capital Improvements

You’ve probably heard about capital improvement at some point during a home project. But what exactly does it mean and how will it benefit you? DreamMaker Bath & Kitchen of Madison, one of the top interior remodeling contractors in the area, explains more about this topic here.

What Is Capital Improvement?

A capital improvement refers to any home addition that permanently changes the structure of a property with the aim of enhancing its value, extending its life or adapting it to new uses. The term broadly applies to any expense invested to increase the value of a home or commercial property. This is different from repair work, which only seeks to maintain a property.

What Is Considered a Capital Improvement?

Something as simple as buying a new water heater or building a tool shed is considered a capital improvement because it is attached to the property and serves to improve its value. A large interior renovation, such as adding a home office or entertainment center, is also a capital improvement. Replacing the roof or windows, adding a patio or porch, and upgrading the current electrical system are other examples. 

What’s not considered capital improvements are minor design changes, such as giving a room a fresh coat of paint, fixing leaks or replacing broken hardware. In fact, according to the Internal Revenue Service (IRS), a project only qualifies when it adheres to the following requirements:

1. The improvement will remain in place for more than a year upon completion.
2. The improvement will fix some defect or design flaw.
3. The improvement will become a permanent part of the property so that its removal will cause significant impact.
4. The improvement will be made with the intention of becoming a permanent part of the property.

How Do Capital Improvements Benefit You?

Some of the advantages of making a capital improvement include:

1. Increased home value. Interior home remodeling projects, like adding a new bathroom or home office, are desirable investments that can boost your home’s overall value. 
2. Tax breaks. Homeowners who invest in capital improvements have an opportunity to qualify for a tax deduction, allowing for a high return on investment.
3. Improved living conditions. You get to enjoy more space with your family. And if you like entertaining, improvements to your home will make entertaining a breeze.

Design Your Dream Home With DreamMaker

Once you’ve decided your home needs sprucing up via a new kitchen or bedroom, just turn to DreamMaker Bath & Kitchen of Madison. Whether you’re aiming for better functionality, aesthetics or comfort, our high-quality home remodeling services will make this happen. We proudly serve homeowners in Madison, Monona, Sun Prairie and the surrounding areas. Call us today at (608) 535-5995 or fill out this contact form to start a conversation!