What Is a Capital Expense?

  • Expenses

A capital expense (CapEx) is money a business spends to buy, upgrade, or maintain long-term assets that will benefit the company for more than one year. These assets are typically used to support operations and help the business grow over time.

Common examples of capital expenses include purchasing equipment, machinery, vehicles, buildings, or technology systems. For example, if a company buys new manufacturing equipment or renovates an office building, those costs are considered capital expenses because the assets will be used for many years.

Capital expenses are different from operating expenses (OpEx). Operating expenses cover the day-to-day costs of running a business, such as rent, utilities, and salaries. Capital expenses are investments in assets that provide long-term value.

Instead of being deducted all at once, capital expenses are usually capitalized and depreciated over the useful life of the asset. This means the cost is spread out across multiple years in the company’s financial statements.

Examples of capital expenses include:

  • purchasing equipment or machinery
  • buying vehicles for business use
  • constructing or renovating buildings
  • purchasing long-term technology or infrastructure

Businesses track capital expenses carefully because they can significantly affect financial planning, cash flow, and tax reporting.

R&D Offer Quiz

Step 1 of 3

Answer to find out if you're eligible for R&D tax credits.

Do the activities performed relate to a new or improved business component’s function, performance, reliability, quality, or composition?(Required)
For Example: A mid-sized packaging company develops a slightly modified cardboard box design to improve its stacking strength (reliability) for warehouse storage, involving minor adjustments to the corrugation pattern to reduce collapse under standard weight loads.
Is your company trying to discover information to eliminate uncertainty concerning the capability or method for developing or improving a business component?(Required)
For Example: A furniture manufacturer investigates whether a cheaper wood adhesive can hold joints as effectively as the current one during assembly, testing bond strength to resolve doubts about its capability in standard production lines.
Do the activities performed constitute a process of experimentation?(Required)
For Example: An auto parts supplier runs a series of bench tests on different lubricant formulations to find one that reduces friction in engine bearings more effectively, systematically comparing wear rates over simulated operating cycles.