Is repainting and re-carpeting a rental unit a current expense or a capital expense for tax purposes?

Repainting walls and replacing worn carpet in a rental unit is almost always a current expense, fully deductible in the year you pay for it. CRA's basic test asks whether the work restores the property to its original condition and maintains it, rather than improving it beyond what it was - a fresh coat of paint and new carpet similar to what was there before does exactly that, so it's treated the same as any other routine maintenance cost.

Where this can shift is if the repainting and re-carpeting are just one part of a much larger renovation project, or if you're upgrading to noticeably higher-end materials as part of a broader overhaul rather than a like-for-like refresh between tenants. In that situation, CRA looks at the whole project rather than each line item in isolation, and the character of the larger renovation can pull even ordinary-looking repairs into capital treatment. Keeping receipts that show the work was routine turnover maintenance, done on its own and not bundled into a bigger project, is the simplest way to support a current-expense claim if CRA ever asks about it.