Capital expenditure (CapEx)

A capital expenditure (CapEx) is money spent to acquire, improve, or extend the life of a property — a new roof, a furnace, a kitchen remodel — as opposed to an ordinary repair that just keeps things working. The tax treatment follows that distinction: a capital improvement is generally added to your basis and recovered through depreciation over years, while a routine repair is usually deducted in the year you pay it.

The line between an improvement and a repair isn’t always obvious, and getting it wrong changes your taxes, so it’s a common thing to review with a tax professional. For budgeting, seasoned owners set aside a CapEx reserve each month, because big-ticket systems fail on their own schedule and a single replacement can swamp a year of cash flow. This is general education, not tax advice.