TL;DR: For an Arkansas investor, depreciation and cost segregation on a rental property start with 27.5 years on the building only, so a $385,000 Benton County benchmark (Arvest Skyline median house price, 1H 2026) puts the straight-line ceiling at $14,000 a year before land is removed. IRS Notice 2026-11 (January 2026) makes 100% bonus depreciation permanent for qualified property acquired and placed in service after January 19, 2025. A cost segregation study moves eligible components into shorter classes; the land share sets your real shield.
How do depreciation and cost segregation work on an Arkansas rental property?
IRS Publication 946 (2025) defines residential rental property as a building where 80% or more of gross rental income comes from dwelling units, and it lists that property at 27.5 years under the general depreciation system. A fourplex rented to four households clears the 80% test easily.
The arithmetic is simple. Benton County's median sale price of houses was $385,000 in the first half of 2026 (Arvest Skyline Report, CBER, University of Arkansas Walton College). That is a house median, not a fourplex price, so treat it only as a county benchmark. $385,000 / 27.5 = $14,000 a year as an upper bound, if every dollar were depreciable building. Land never depreciates, so the real figure is lower.
For the Arkansas side, the top individual rate for tax years beginning on or after January 1, 2026 is 3.7% (Act 1 of the 2026 First Extraordinary Session). $14,000 x 3.7% = $518 a year of Arkansas tax reduced at that top rate. Your federal rate is a separate conversation with your CPA.
If you are pricing a Benton County fourplex, that means the baseline shield is modest and steady, and it shrinks by whatever share of the price sits in land.
What does cost segregation change, and what are the current bonus depreciation rules?
A cost segregation study classifies a property's assets into shorter recovery periods, which accelerates deductions (IRS Publication 5653, Cost Segregation Audit Techniques Guide, revised February 2025 per the IRS listing). The guide gives examples of the classes a study assigns, such as land, land improvements, buildings, and equipment, furniture and fixtures. The building shell stays on the 27.5-year schedule; the study identifies components that belong in the shorter classes. Those are typically 5- and 7-year personal property (such as appliances and carpeting) and land improvements (such as paving and landscaping). Bonus depreciation applies to property with a recovery period of 20 years or less (IRS Publication 946, 2025), so it reaches the shorter-class components a study identifies and never the 27.5-year building.
The bonus rate is now settled. IRS Notice 2026-11 (January 2026) says section 70301 of P.L. 119-21 (the One Big Beautiful Bill Act) provides a permanent 100% additional first-year depreciation deduction for qualified property acquired and placed in service after January 19, 2025, which IRS Publication 946 (2025) also reports. The 40% election applies only to the first taxable year ending after January 19, 2025, so a calendar-year taxpayer placing property in service in 2026 does not have it. For qualified property acquired after September 27, 2017 and before January 20, 2025, and placed in service in 2025, the allowance is limited to 40%.
If you are closing on a fourplex now, that means acquisition date and placed-in-service date both drive which percentage applies, so keep both documented.
How much of a fourplex's price is land, and why does it matter?
Land is excluded from depreciation, so the land-to-building split decides your depreciable basis. Do not plug in a generic percentage. Have your CPA set the split for the specific property before you count any deduction, and run the 27.5-year math on the building portion only. Every dollar assigned to land comes off the $14,000 straight-line ceiling at the Benton County benchmark.
The purchase also resets your property tax. Arkansas assesses real property at 20% of market value, and under Act 2284 of 2005 a purchase is reassessed at 20% of appraised value at the next assessment date, with no Amendment 79 limitation available to the new owner until the second assessment date. Property is assessed as of January 1 (AG Op. 2017-067), so the reset takes effect on the next January 1 after closing; closing before or after January 1 changes the year the buyer's bill resets. At the county benchmark, $385,000 x 20% = $77,000 of assessed value, and your overall millage (school plus city plus county) applies to it. A rental does not qualify for the homestead credit, which covers a principal residence only.
If you are comparing fourplexes, that means ask your CPA to set the land and building split for each one before you compare prices, and treat the $14,000 figure only as a ceiling.
Is the tax shield worth chasing in this rental market?
Depreciation reduces tax, not risk, and the rent side has softened. Northwest Arkansas multifamily vacancy rose to 7.3% in the first half of 2026 from 3.7% a year earlier (6.1% in the second half of 2025), and average rent rose 4.7% from a year earlier to $1,145 a month (Arvest Skyline Report, 1H 2026; Benton and Washington counties). With 14 new and completed complexes (1,710 units) removed, vacancy was 5.4%, so new supply explains much of the jump.
City averages differ: Bentonville $1,296, Rogers $1,280, Springdale $1,112 and Fayetteville $1,060 (Skyline, 1H 2026). These are apartment lease averages, not fourplex or single-family rents.
Benton County listings are also sitting longer: median 72 days in September 2026, up from 59 in September 2025 (Realtor.com via FRED), with 2,441 active listings against 1,832. That measures listings, not sales.
If you are weighing a purchase, that means a tax deduction cannot rescue a unit that sits vacant. Underwrite the rent and vacancy first, then treat depreciation as the second layer.
What should you do with these numbers?
- Ask your CPA to set the land and building split for each fourplex you are considering before you compare prices.
- Divide the building portion your CPA sets by 27.5 to get your straight-line baseline; the $14,000 benchmark (Benton County, 1H 2026) is an upper bound that assumes no land.
- Ask your CPA whether a cost segregation study fits, and confirm the acquisition and placed-in-service dates against Publication 946 (2025) and Notice 2026-11 (January 2026).
- Budget property tax at price x 20% x overall millage, the same as new construction; do not assume a seller's capped bill transfers.
- Underwrite against 7.3% Northwest Arkansas multifamily vacancy (1H 2026) before counting any tax benefit.
Frequently Asked Questions
How long do you depreciate a rental fourplex?
A fourplex is residential rental property depreciated over 27.5 years under the general depreciation system (IRS Publication 946, 2025). Residential status requires 80% or more of gross rental income to come from dwelling units. Land is not depreciable, so only the building portion of your purchase price follows that schedule.
Is 100% bonus depreciation available in 2026?
Yes. Under P.L. 119-21 (the One Big Beautiful Bill Act), the additional first-year depreciation deduction is a permanent 100% for qualified property acquired and placed in service after January 19, 2025 (IRS Notice 2026-11, January 2026; IRS Publication 946 (2025)). It applies to components with recovery periods of 20 years or less, not to the 27.5-year building, and a taxpayer can elect out by class. Your CPA confirms how it applies to your property.
Does cost segregation work on a fourplex?
Cost segregation can apply to a fourplex, because a study classifies assets into shorter recovery periods and accelerates deductions (IRS Publication 5653, revised February 2025 per the IRS listing). Whether the study fee is worth it depends on how much basis it moves, which depends on your land share and the property's components. Ask a preparer for an estimate before commissioning one.
How does Arkansas tax the gain when you sell a rental property?
Arkansas taxes 50% of net long-term capital gain (short-term gain is fully taxable), so the top effective rate on a taxable long-term gain is about 1.85% (3.7% x 50%, 2026). The residence exemption in the DFA 2025 AR1000F/AR1000NR Instructions requires the home to be owned and lived in as a principal residence for two of the five years before the sale, which a rental does not meet.
Mason Capital Group can prepare a side-by-side comparison of price, rent and estimated property tax at full assessed value for the Benton County fourplexes you are weighing, ready for your CPA to set the land and building split. Call 479-925-3333 for a first conversation at 609 SW 8th Street, 6th Floor, Bentonville, AR 72712.
About the author: Cameron Torabi, Principal Broker — Mason Capital Group. 30+ years of Northwest Arkansas real estate expertise; $2.4B+ in cumulative transaction activity (estimated).
Figures in this article are drawn from IRS Publication 946 (2025), as of October 30, 2026; IRS Notice 2026-11 (January 2026); IRS Publication 5653 (revised February 2025 per the IRS listing); the Arvest Skyline Report, University of Arkansas Walton College CBER (1H 2026, released August 21, 2026); Realtor.com Housing Inventory via FRED (September 2026); Act 2284 of 2005, AG Op. 2017-067 and Arkansas DFA Assessment Coordination Division (current as of October 2026); and Arkansas DFA 2025 AR1000D capital gains instructions and AR1000F/AR1000NR Instructions, with Act 1 of the 2026 First Extraordinary Session (approved May 6, 2026).