depreciating laminate flooring

[Jeff J.]

Carpet is depreciated over 5 years and new hardwood floors are permanently affixed to the property so it should be depreciated over 27 1/2 years.  What about laminate or engineered wood flooring?  Looking online it is a little fuzzy what the right depreciation period is.

I suspect it is 27 1/2  years?

Any CPA's out there who can answer this question?

Thanks

Jeff

[Brandon Hall]

@Steve Vaughan The new rules attempted to clarify what you can write-off vs. capitalize and depreciate, but in my opinion they only muddied the water. Few investors can qualify for the safe harbors, so they have to resort to the Betterment, Adaption, and Restoration (BAR) tests. From my conversations with other professionals who utilize the IRS Final Tangible Property Repair Regs, there is a 30% materiality threshold that is applied to these repairs. The confusing part is that the IRS defines the structure UOP as containing floors, walls, roof, and foundation - so even if you repaired 100% of the floors, is it material to the structure as a whole? I'd say yes, but can also see the argument to deduct as a repair. We will need a few tax court cases to have a better idea of what's expected.

Anyway, the first question is whether or not you can qualify for the Safe Harbor for Small Taxpayers - what's the unadjusted basis of your property (purchase price, plus acquisition costs, plus improvements. NO depreciation factored in here) and what is the cost of your annual repairs for the property, including the replacement flooring? If greater than 2% of your unadjusted basis, you move on to the BAR test.

The BAR test is, in summary, where you apply the 30% materiality threshold. You are only replacing 23.2% of the total floors. Obviously when we compare this to the structure as a whole, the amount repaired will be less than 30%. Therefore, I'd consider this a repair.