What Are Capital Expenses?

​Capital Expenses or Expenditures are payments made by the investor / investment business to acquire or improve long-term capital assets (buildings and equipment).  Capital expenses are significant purchases (adds to the value) that the investor / investment business makes as an investment.  The cost of these capital expenditures is depreciated (capitalized) over a period equal to the useful life of that asset.

Are Maintenance Costs Capitalized?
Generally, the costs to maintain and keep equipment in working order, and in its current condition are not considered capital costs or expenses.  The cost of repairing a piece of equipment to improve its condition adds to its value and is a capital expense. 

Land
Although purchasing land is a capital expense, it does not decrease in value, and it is deemed to have an indefinite value, so land is not depreciated. 
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What is the difference between Operating and Capital Expenses?
The opposite of operating expense is capital expenditure.  Operating expenses are items used in your business that have a short life and are used up.  Capital expenses are used to buy assets that have a useful life of more than one year and are not used for the day-to-day operations of a business (rent, utilities, insurance).  Fixed assets are capital expenses because they will last longer than one-year.
For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.