What Is Capital Outlay?

Capital outlay or expenditures are expenses that add a fixed asset to a business or increase the value of an existing fixed asset. Purchases are normally considered a capital outlay if they benefit a business for more than one year.

Significance

It is important for business owners to know what capital expenditures are because businesses can depreciate them on their income tax statements each year.

Types

New fixed assets can include such equipment as tractors, boats, machinery, office furniture and calculators. Replacing motors on equipment is an example of a capital outlay for an existing fixed asset.

Structural Outlay

A business can depreciate up to $15,000 of capital outlay expenditures for major alterations or remodeling of existing buildings. This can include the repair of air conditioners or electrical wiring, according to fm.colorado.edu.

Nonstructural Expeditures

A business can depreciate up to $15,000 of capital outlay expenditures that are nonstructural in nature, including leveling or grading land, adding fences or sewers, or paving a road.

Considerations

New construction projects cannot be depreciated. They are not considered capital outlay.

References

• Education Statistics: Capital Outlay
• University of Colorado: Capital Outlay
• Tax Guide: What, Exactly, Is a Capital Expenditure?

Resources

• Daily Markets: Calculating Maintenance Capital Expenditure