Replacing the flooring can be deducted as an expense or depreciated, depending on where it falls in the IRS definitions of Repairs, which are deducted, vs. Permanent Improvements, which are depreciated. Please see: https://www.irs.gov/pub/irs-pdf/p587.pdf
For Repairs, the IRS says: Repairs keep your home in good working order over its
useful life. Examples of common repairs are patching
walls and floors, painting, wallpapering, repairing roofs
and gutters, and mending leaks. However, repairs are
sometimes treated as a permanent improvement and are
not deductible.
Whereas for Permanent Improvements, it says: A permanent improvement
increases the value of property, adds to its life, or
gives it a new or different use. Examples of improvements
are replacing electric wiring or plumbing, adding a new
roof or addition, paneling, or remodeling.
A high-quality wallpaper might be an improvement whereas a similar or lower-grade carpet might only be a repair. That's for you to judge.
To deduct the flooring expense, start in Business Expenses
> Home Office Expense, select Start or Update, then proceed to the screen
"How do you want to enter [your] home office expenses for 2016?" You'll choose the first "actual expenses"
method, then proceed to the screen with the question, "Does [name] have
expenses that apply only to the home office?" Select yes and proceed to the screen where
you enter the home office-only repairs.
To depreciate, Start or Update Business Assets and follow the screens to enter the flooring as an asset.
