Capital Improvement

A capital improvement adds value to your home, prolongs its useful life, or adapts it to new uses. Examples include a kitchen or bathroom renovation, an addition, a new roof, a replaced HVAC system, or a finished basement. The cost of these improvements is added to your cost basis, which lowers your taxable gain when you sell.

Ordinary repairs and maintenance, such as repainting, fixing a leak, or replacing a broken window, keep the home in working order but do not add to basis. The line matters at sale time: keep receipts for improvements so you can raise your basis and reduce your gain. Our home sale capital gains calculator lets you add improvements to the basis.