Can new flooring over badly stained carpet be considered a repair

10 Replies

My accountant says that if the carpet is badly stained, replacing it with new flooring might be considered a repair.  Is this true?  The carpet has also been torn up in one small patch.  Other than that, it is just very badly stained. 

This is somewhat subjective but generally I would say no. However it will never be an issue unless you are audited.  My laypersons understanding, I am not an accountant or tax professional. 

Yes, it is almost undoubtedly a repair.  Carpet, like many other elements in a house, does need to be replaced periodicallly, like windshield wipers on your car, which is why no warranty on a car will cover things like that.  That is part of normal wear and tear, and basic maintenance of a home, and adds no value.  It's really no different than refinishing existing flooring or repainting, replacing a broken window, or buying a new washing machine when the existing one dies.

Now if you were to do something like upgrade to hardwood floors from carpet, that might be a different story.  That is much more likely to be considered a capital improvement, at least in part.  Ditto with things like adding a washing machine or dishwasher where there wasn't already one before, installing new windows as part of a major kitchen remodel that requires their reconfiguration, and so forth.  Understand the difference? 

Not everything is very black and white, however, and a lot may depend in some situations on how much useful, depreciable life is considered to be left in the asset replaced.  Useful life is entirely a tax concept that determines how long you can deduct a given investment in an asset, and has nothing to do with how long something will actually last and be serviceable. 

Now if you've just bought the place and have to rehab/remodel it, as opposed to work done on a property you've already owned for a while, I don't know how it would be treated.  It might be different, but I don't know.

In any event, I would listen to your accountant, because he has a far better idea of what the IRS will have to say, than we do, particularly in any given situation, and the IRS's opinion is what counts.

I would highly recommend, however, that you not install anything *over* carpet.  That will cause almost anything to fail and wear out far faster than normal, probably void any warranties, plus will likely create a trip hazard at doorways and perhaps unsteady walking conditions across the expanse of the flooring, which would be a hazard to health and safety in itself and expose you to liability if someone were to get hurt as a result.  Pull the carpet up, prep and level the subfloor appropriately, then lay the new flooring, whatever you choose.

I note you haven't said what you wan to put over the carpet. Before I can tell you what you can or can't do successfully I'd need to know. If you're think hard surface  DON'T it is a major disaster waiting to happen.

Seriously, your accountant's advice in two threads now is very different from what the IRS has written in publication 527 intended to assist taxpayers; see page 5 of this PDF:

Can we just call it bad advice now?

Only considered a repair if the new flooring is installed on top of the badly stained carpet as stated in your title!   Ha

Yikes, my bad!  I was actually thinking about what can and cannot be added to the basis with residential property one lives in.  

Thanks for the corrections, folks - and the link to the IRS publication.  

Sorry for any confusion my post may have created. I'll go crawl back under my rock now. 

@Wendy Hoechstetter - all you did was try to help.  I know the feeling.

As of yesterday I am officially tax-related and entity-related post agnostic! Set up an LLC for your mobile home and hire the OPs accountant for all I care.

 Thankless jobs, both of them.  Whew!

Replacing the carpet would be considered a capital expenditure that would be depreciated. Wendy was off on most of her statements. A washing machine is a capital expenditure. A window replacement is a capital expenditure. If you repair a broken washer, or window then it would be an expense. If you buy a property and rehab, repair or any work before you out it into service (rent it out) everything is considered a capital expenditure. 

However you have the option to file under the de minimus provision of the tax code and have any cost under $500 be considered an expense for tax purposes. You would have to declared this at the beginning of the year to use it to file it on your taxes this year though. For example, if I were to remove a window and put in a new patio door and it cost me $450 I could have it be a expense even though it would be clearly a capital expenditure.

Originally posted by @Kyle Hipp :

Wendy was off on most of her statements.

Like I said about 6 hours earlier ;-)

Thanks everyone.  I so appreciate it.  I will get a new accountant.  So I'm guessing I should just move out and have everything fixed after I leave if I'm concerned about deductions? 

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here