Carpet Damage – What is Your Tenant’s Liability?
Budgeting in replacement of carpet is a cost calculation every landlord should plan for. It is generally thought a carpet’s useful life in a rental is estimated to be between 8 - 10 years with normal wear and tear. However, the IRS has a different take on the number of years that represent useful life of carpeting. If your rental’s wall-to-wall carpeting is tacked down, the IRS rules allow for depreciation over a 5-year period. However, if the carpet is glued to the floor, (more typical in commercial applications), the depreciation schedule is over 27.5 years – the same period of time the IRS considers the useful life of a rental property.*
A tenant is not responsible for normal wear and tear to flooring. Normal wear and tear is defined as moderate scuffs, marks, nicks, light stains or spotting. When hard surface floors and carpet show signs of wear beyond normal wear and tear, including that caused by pets, tenants become responsible because it is considered damage. Examples of damage to carpet would include serious and large stains, rips or burns. In hard surface flooring gauges in wood or vinyl, cracks and chips in tile would be considered damage. So how is damage cost calculated? If your tenant causes damage to carpet in the bedroom, it doesn’t mean you can have the entire house re-carpeted at your tenant’s expense. The same is true for wood, vinyl or tile damage. There are no hard and fast rules in calculating how to charge a tenant for flooring damage, however, a property manager will always look for what is reasonable to both the tenant and the property owner, and also is strongly guided by how a judge might rule should a dispute be brought to court. In most cases a judge will take into consideration IRS rules allowing for useful life and depreciation. The judge will also consider the percent of area where damage has been caused to the overall square footage of the rental and whether or not it was necessary to replace the section of damage or an entire room. If your carpeting is over 5 years old, you may have a difficult time winning a case against your tenant despite obvious damage caused by them, because having taken full depreciation on the carpet, the judge will consider the useful life of the carpet has expired and replacement would be required regardless of tenant damage.
In most cases, where damage to the carpet has occurred, full replacement for that room is often necessary because patching with carpet taken from a closet, or even left over carpet from original install will not match due to surrounding wear, tear and fading. In this event a typical formula we follow to charge against the tenant’s security deposit is as follows:
- Using entire area of original install, calculate the percentage of area to be replaced.
- Calculate percent of remaining life of carpet based upon IRS guidelines
- Take overall original cost to install the entire carpeted area in the rental and multiply by % of remaining life. Take that number and multiply by % of area to be replaced.
* IRS guidelines based on pre-Tax Reform Bill of December 2017. Any potential changes to these guidelines are unknown at time of publication.
Look for the 2018 Preventative Maintenance Suggested Services at the end of January. These will be emailed to you with a request for you to return to us with your choice of opt-in or opt-out for each suggested service.
Drive Bys: Spencer and Kristal were busy in December getting to each one of our rental properties to conduct our end of year drive by. The next scheduled drive bys will be in early spring to assess any potential winter damage to property exteriors.
Year End Accounting
- Your Year End Statement will detail 2017 profit and loss (owner’s income and expenses), for each property. This statement will be available to view on your online portal. It will also be sent to you by US mail in January.
- Your 1099 will be mailed on or before January 31. For security reasons, it will not be made available online.
If you ever have questions about your statement, please contact Karen@rentalsinboise.com.
Our January Tenant Newsletter reminded our tenants of several items to guard against freezing temeratures and spotlighted content for the year ahead. If you’re interested to read the tenant newsletters, you will find them on our website.
What Are You Interested In?
This newsletter is intended as a resource and communication platform for you. If there is a topic, relevant to the management of your investment property, that you would like me to write on, please let me know!