Quick Answer
Yes, replacing a floor is a capital expense (capitalised and depreciated, not expensed in the year you pay for it). Patching a damaged section or refinishing an existing floor is usually a repair and can be deducted in the year incurred. The IRS distinguishes between improvements and repairs using the "BAR" test: Betterment, Adaptation, Restoration.
For homeowners using the home as a personal residence, the floor is still a capital improvement, it just adds to your cost basis for capital-gains purposes rather than giving an annual deduction.
The BAR Test
Under IRS regs (Reg. 1.263(a)-3), an expenditure on tangible property must be capitalised if it is a:
- Betterment. Materially increases value or capacity.
- Adaptation. Changes the property to a new or different use.
- Restoration. Returns the property to like-new condition (replacing a major component or substantially all of one).
A full floor replacement clearly fits "restoration," so it is capitalised. Patching one room is not a substantial portion of the floor in most buildings, so it remains a repair.
Examples That Are Capital
- Replacing all the flooring on the main floor of a rental.
- Replacing carpet with hardwood (an upgrade, betterment).
- Converting a basement floor from utility concrete to finished tile (adaptation).
- Full re-tile of a commercial bathroom.
Examples That Are Repairs
- Patching a 3-square-foot water-damaged section.
- Refinishing existing hardwood (sand and reseal).
- Replacing a few cracked tiles.
- Routine carpet steam cleaning.
Depreciation Lives
For US tax, depreciation lives in 2026 are:
- Residential rental property flooring: 27.5 years straight-line (part of the building).
- Nonresidential commercial real property flooring: 39 years, unless it qualifies as Qualified Improvement Property (QIP), then 15 years.
- Carpet (treated as personal property by some authorities): 5 to 7 years.
QIP is eligible for bonus depreciation, 40 percent in 2026 per the current phase-down. Section 179 may also apply with limits.
Homeowner Implications
If the property is your personal residence, you cannot deduct or depreciate the new floor in the year you install it. Instead the cost is added to your cost basis. When you sell, the higher basis reduces taxable gain. Keep the invoice for as long as you own the home, plus 3 years.
Safe Harbour for Small Taxpayers
The IRS de minimis safe harbour lets businesses expense items under 2,500 dollars per invoice (5,000 dollars with an applicable financial statement). Most flooring jobs exceed this, but a small repair patch absolutely qualifies.
UK Treatment
HMRC distinguishes capital from revenue using similar principles. Replacing a floor with a like-for-like floor in a rental is sometimes treated as a deductible repair (the floor as a whole is not a separate asset, it is part of the building). Upgrading to a better material can shift it to capital. Talk to your accountant about the specific facts.
Bottom Line
Treat a full floor replacement as a capital expense, depreciate it over the property's life or QIP's 15 years, and use bonus depreciation when available. Treat patching, refinishing and routine cleaning as repairs in the year incurred. For your own home, the floor is a capital improvement that adjusts your cost basis at sale.
FAQ: Flooring as a Capital Expense
How long do I depreciate flooring?
27.5 years for residential rental, 15 years if it qualifies as QIP for nonresidential commercial. Carpet is sometimes 5 to 7 year personal property.
Is sanding and refinishing a capital expense?
No, that is a deductible repair. Restoring an existing floor is maintenance.
What about a full floor replacement in a rental?
Capitalised over 27.5 years. The old floor's remaining basis can be written off in the year it is removed.
Can I take 100 percent bonus depreciation?
Not in 2026, the bonus rate has phased down to 40 percent. Section 179 can sometimes fill the gap up to the annual cap.
Final Tips
- Full replacement is capital, patching is a repair.
- Use QIP rules for commercial leasehold flooring.
- Layer Section 179 and bonus depreciation strategically.
- Keep itemised invoices showing what was replaced vs repaired.
Worked Example: Rental Property
A landlord owns a single-family rental and replaces 1,200 square feet of carpet with LVP at a total cost of 8,400 dollars (7 dollars per square foot installed). The accounting:
- The replacement is capital because it is a restoration (full floor of a major area).
- It is added to the building's basis and depreciated over 27.5 years for residential rental property, straight-line.
- The annual depreciation deduction is 8,400 / 27.5 = 305 dollars per year.
- The remaining basis of the old carpet (if any) can be written off in the year of removal as a partial disposition election under IRS regs.
If the same landlord had instead patched a single 80-square-foot water-damaged room for 600 dollars, that is a repair and fully deductible in the year incurred.
