Cost Segregation in Arkansas

Ultra-low property taxes, full bonus depreciation conformity, and some of the most affordable housing in America make Arkansas a cash-flow king for investors who prioritize immediate returns and maximum tax efficiency.

Population
3.05M
Median Home
$215K
Property Tax
0.62%
12th lowest in U.S.
State Income Tax
4.40%
Top Rate
Bonus Depreciation
Full
State Conformity
Avg. Insurance
$2,600
13% above average
Tax Strategy

Cost Segregation & Tax Rules in Arkansas

Understanding how federal and Arkansas state tax rules interact is critical to maximizing your cost segregation benefits.

Cost Seg Overview
State vs. Federal Rules
Tax Landscape
Median Home Price
$215K
Building Value
85%
of purchase price
Cost Seg Range
20-35%
of building reclassified
Median Home Age
42 yrs
Built ~1982
What Gets Reclassified

A cost segregation study identifies building components that can be depreciated over 5, 7, or 15 years instead of the standard 27.5 or 39 years. In Arkansas, typical reclassification rates are 20-35% of building value.

Common Property Types
Single-Family RanchBrick Single-FamilySmall Multi-Family (2-4 units)Manufactured Homes
Lower property values mean lower study fees. The high building-to-land ratio (85%) maximizes your depreciable basis. Older homes (median 1982) may have had renovations that create additional reclassification opportunities.
Overline Study Cost & ROI
Overline Study Cost
$499 - $2,000
Avg. ROI
10-40x

The math: A $215K property with 85% building value and 28% reclassification yields ~$19K in Year 1 federal tax savings at the 37% bracket — significantly more ROI than traditional studies costing $5,000-$10,000+.

Housing Stock Advantage

With a median build year of 1982, Arkansas's housing stock has identifiable components (HVAC, electrical, plumbing, landscaping) that are strong candidates for accelerated depreciation.

Full Conformity
Arkansas Bonus Depreciation Conformity

Arkansas conforms to all federal bonus depreciation provisions under IRC Section 168(k). As AR continues reducing its top income tax rate (from 6.6% toward 4.4%), cost seg reclassifications deliver dual federal-state savings in Year 1, with the state benefit particularly impactful for higher-income investors.

What This Means for Your Investment: Full conformity means cost seg benefits are maximized in Arkansas. Federal AND state deductions apply in Year 1, and the low property values mean your study cost ROI is exceptional.

Federal vs. AR Depreciation Timeline
PeriodFederal TreatmentAR State Treatment
Year 1100% bonus depreciation100% bonus depreciation (full conformity)
Years 2+Standard MACRS schedulesSame as federal
Section 179 Expensing
State ConformityConforms

AR conforms to federal Section 179 expensing limits. For the state's affordable rental inventory, Section 179 helps capture additional deductions on HVAC systems, appliances, and qualifying improvements.

Key Takeaway

A $215K property with a $183K depreciable basis and 28% cost seg reclassification yields ~$19K in federal tax savings PLUS ~$2.3K in AR state tax savings in Year 1 — a total of ~$21.3K on a very affordable property.

Bottom Line

Arkansas is one of the best states for cost segregation from a tax conformity perspective. Full bonus depreciation at both federal and state levels, combined with low property prices, means every cost seg dollar works harder here.

Eff. Property Tax
0.62%
12th lowest in U.S.
Transfer Tax
$3.30 per $1,000 of sale price
State Income Tax
4.40%
Top Rate
Property Tax Details

Assessment ratios are 20% of appraised value for all property types. Very low effective rates compared to national averages.

Assessment Methodology
MethodMarket value at 20% assessment ratio
Reassessment CycleEvery 3-5 years (county-dependent)
Assessment BodyCounty Assessor
Appeal WindowWithin 30 days of assessment notice
Appeal Success Likelihood
Good
LowModerateGoodVery High

Arkansas assesses at 20% of market value, creating a built-in discount. The relatively infrequent reassessment cycle means values can lag behind market corrections, creating appeal opportunities. County equalization boards handle first-level appeals.

Work with Overline — Our team helps Arkansas investors identify over-assessed properties and file tax appeals. A successful appeal can save thousands annually and compounds your cost seg savings.

Illustrative Example

Cost Seg Example for Arkansas

This example assumes a purchase eligible for 100% bonus depreciation. All factors below are based on averages from our historical cost segregation studies for AR properties. To see your exact savings, run a property-specific cost seg analysis below.

Typical Arkansas Property Details
$
50%95%
5%35%
2%25%
Total Reclassified28% of building
10%37%
Estimated Year 1 Tax Savings
Building Value$182,750
$215,000 x 85%
Normal Annual Depreciation$6,645
$182,750 ÷ 27.5 yr (residential)
5-Year Reclassified$31,068
15-Year Reclassified$20,103
Total Accelerated$51,170
28% of $182,750 building value
Federal Tax Savings (Year 1)$18,933
$51,170 x 37% bracket
Total Year 1 Tax Savings$18,933
7.7x normal annual deduction captured in Year 1

AR State Tax: AR has full bonus depreciation conformity — your state tax savings also apply in Year 1.

Depreciable Basis

Land vs. Building Value in Arkansas

The land-to-building ratio directly impacts your cost segregation benefit — only the building portion is depreciable. Here is how Arkansas breaks down by region.

Statewide Average
Building (Depreciable)85%
Land (Non-Depreciable)15%
85%
Depreciable Basis
Breakdown by Region
Little Rock Metro
82% Building

State capital with moderate land costs. Strong depreciable basis for cost seg.

NW Arkansas (Fayetteville/Bentonville)
78% Building

Walmart corridor has driven up land values, but building ratios remain favorable.

Fort Smith
88% Building

Very affordable market with excellent building-to-value ratios.

Hot Springs / Rural
90% Building

Lowest land costs in the state. Exceptional cost seg ratios but smaller market.

Investor Takeaway

Arkansas offers some of the best land-to-building ratios in the country. With 82-90% building values across most markets, nearly every dollar of your purchase price goes toward depreciable basis. This is a cost seg-optimized state.

Insurance & Risk

Insurance Landscape in Arkansas

Insurance costs directly impact your cash flow. Understanding Arkansas's risk profile helps you budget accurately and avoid coverage gaps.

Avg. Annual Premium
$2,600
13% above average
National Average
$2,300
for comparison
Premium Trend
Rising 8-10% annually due to severe storm claims
Primary Risk Drivers
1
Tornadoes & Severe Storms
Arkansas sits on the fringe of Tornado Alley. EF3+ tornadoes occur annually. 2023 was a particularly active year.
2
Hail Damage
Frequent large hail events damage roofs and building exteriors. Hail claims are the #1 insurance cost driver in AR.
3
Flooding
Arkansas River and tributary flooding affect multiple communities. Flash flooding from Ozark mountain runoff is common.
Coverage Recommendations
Wind/hail deductible (typically 1-2% of dwelling coverage) — understand this before purchasing
Flood insurance recommended in river valley areas (NFIP or private)
Replacement cost coverage essential for older brick homes
Umbrella policy for landlords ($1M+) given storm-related liability exposure
Cost Seg + Insurance Connection

AR's higher insurance costs make accurate building valuation even more important. A cost seg study provides detailed component-level documentation that supports precise insurance replacement cost estimates — potentially lowering premiums or ensuring adequate coverage.

Market Fundamentals

Economy & Housing Demand in Arkansas

Strong economic engines create stable rental demand. Here is what drives Arkansas's economy and housing market.

State GDP
$155B
Growing 2.2%/year
Unemployment
3.4%
Below national average
Median Income
$54,000
+14.5% over 5 years
Pop. Growth (1Y)
+0.4%
+12,000/year net migration
Major Industries
Retail & Logistics18%
Walmart HQ (Bentonville), Dillard's, Murphy USA, J.B. Hunt Transport. NW Arkansas is a global retail/logistics hub.
Government16%
State capital employment, federal agencies, VA Medical Center. Government jobs provide recession-proof rental demand.
Healthcare14%
UAMS (largest employer in Little Rock), Arkansas Children's Hospital, Baptist Health, CHI St. Vincent.
Military & Defense10%
Little Rock Air Force Base (C-130 training hub), Pine Bluff Arsenal, Camp Robinson.
Agriculture & Food10%
Arkansas is the #1 U.S. rice producer, #2 in poultry. Tyson Foods HQ is in Springdale.
Key Economic Engines
Walmart HQ + vendor ecosystem: 1,300+ supplier companies in NW Arkansas
Little Rock AFB: $1.3B annual economic impact, 7,000+ military and civilian jobs
UAMS Medical Center: 11,000+ employees, Arkansas's largest public employer
Tyson Foods + agriculture: 25,000+ AR employees in food processing and poultry
Housing Demand Signals
5-Year Pop. Growth
+2.8%
Housing Permits YoY
+3.2%
Median Days on Market
42 days
Months of Inventory
3.1
Migration: NW Arkansas (Walmart corridor) drives most in-migration. Little Rock attracts government and healthcare workers. Retirees drawn by low cost of living.
Construction: Brick ranch single-story, Wood frame with vinyl siding, Slab-on-grade foundation, Some raised/pier foundation (flood areas)
Landlord & STR Rules
Landlord Friendliness
Very Friendly
Eviction Timeline
30-40 days
Rent Control
Prohibited statewide
STR Regulation
Minimal

Arkansas has very limited STR regulation. Most cities, including Little Rock, have minimal or no specific STR ordinances. Hot Springs and some tourist areas may have local rules.

Local Markets

Top Cities for Investors in Arkansas

Explore city-level cost segregation data, sample deals, and investment fundamentals for each major market in Arkansas.

Little Rock, AR
Cash Flow King
Median Home
$215K
Rent (3BR)
$1,350
Property Tax
0.73%
Avg. Insurance
$2,400/yr
Est. Year 1 Tax Savings$20K+
View Little Rock Details
Local Partners

Investor-Friendly Partners in Arkansas

We are building a curated directory of top investor-friendly brokers, property management companies, and service providers in Arkansas.

Investor-Friendly Brokers

Top real estate agents who specialize in investment properties and understand cost segregation, 1031 exchanges, and cash-flow analysis.

Coming Soon
Property Management

Vetted property managers who handle tenant screening, maintenance, and rent collection for both long-term and short-term rentals.

Coming Soon
Insurance Agents

Independent insurance agents who specialize in rental property coverage and can leverage cost seg data for accurate replacement cost estimates.

Coming Soon

Are you a broker, property manager, or insurance agent serving investors in Arkansas?

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Frequently Asked Questions

Cost Segregation FAQ — Arkansas

Does Arkansas conform to federal bonus depreciation?

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Arkansas conforms to all federal bonus depreciation provisions under IRC Section 168(k). As AR continues reducing its top income tax rate (from 6.6% toward 4.4%), cost seg reclassifications deliver dual federal-state savings in Year 1, with the state benefit particularly impactful for higher-income investors.

What is the property tax rate in Arkansas?

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The effective property tax rate in Arkansas is 0.62%, ranked 12th lowest in U.S. in the U.S. Assessment ratios are 20% of appraised value for all property types. Very low effective rates compared to national averages.

How much can I save with cost segregation in Arkansas?

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A $215K property with a $183K depreciable basis and 28% cost seg reclassification yields ~$19K in federal tax savings PLUS ~$2.3K in AR state tax savings in Year 1 — a total of ~$21.3K on a very affordable property.

What are the typical cost segregation reclassification rates in Arkansas?

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In Arkansas, typical cost segregation studies reclassify 20-35% of building value into accelerated depreciation categories (5-year, 7-year, and 15-year property). Overline studies cost $499-$2,000 with 10-40x ROI.

What is the average insurance cost for rental properties in Arkansas?

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The average annual homeowner insurance premium in Arkansas is $2,600, which is 13% above average the national average of $2,300. Key risk drivers include Tornadoes & Severe Storms and Hail Damage.

What is the state income tax rate in Arkansas?

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Arkansas has a state income tax rate of 4.40% (Top Rate). Arkansas has been aggressively cutting income taxes — from 6.6% (2019) to 4.4% top rate (2025). Further reductions are planned, making AR increasingly competitive.

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