Arkansas Bonus Depreciation: §168(k) Was Never Adopted.
Arkansas adopts IRC §§167 and 168(a)-(j) as those sections stood on January 1, 2019, and pointedly excludes subsection (k). There is no add-back-and-recover cycle to track — depreciation runs on ordinary MACRS from Year 1 for Arkansas purposes.
Reviewed by Cost Seg Smart Editorial Team · Last verified against Arkansas DFA — Corporation Income Tax Instructions (Line 23, Depreciation)
The 30-second answer: Arkansas has decoupled from federal §168(k) bonus depreciation — but not through an add-back. Arkansas adopts §§167 and 168(a)-(j) as of January 1, 2019 and pointedly excludes subsection (k), so the property is depreciated under ordinary MACRS on the Arkansas return from Year 1, with nothing to add back later.
A note on the evidence: every raw Arkansas statute source was blocked this session, so this conclusion rests on Arkansas DFA's own Corporation Income Tax Instructions, which state directly that §26-51-428 "does not adopt the bonus depreciation provisions contained in Internal Revenue Code 168(k)." That is strong agency guidance, not a reading of the statute text itself — and the individual-taxpayer answer is inferred from the same section rather than separately confirmed.
On a representative Arkansas single-family rental (the single-family rental band we publish, 9–32% of depreciable basis reclassified, 16% representative), the reclassified components alone generate an estimated $18K–$165K of federal Year-1 depreciation — roughly $6,660–$61,570 of federal Year-1 tax savings at the 37% top bracket, fully intact regardless of the Arkansas answer.
Federal vs Arkansas, Side by Side
For an individual investor's or Arkansas business's cost-segregation-reclassified components:
| Tax provision | Federal (IRC) | Arkansas |
|---|---|---|
| Bonus depreciation under §168(k) | 100% may apply to qualified property acquired and placed in service after January 19, 2025, subject to §168(k) eligibility, related-party/prior-use, binding-contract, and election rules | Not adopted. Arkansas adopts §§167 and 168(a)-(j) as of 2019-01-01 and excludes (k) (Ark. Code Ann. §26-51-428, per DFA guidance) |
| Mechanism | Not applicable | No add-back cycle. Depreciation is ordinary MACRS from Year 1 — there is nothing added back or later recovered |
| §179 expensing | Federal §179 limits apply | Adopted as of 2022-01-01 with an Arkansas-specific phaseout — a separate provision from bonus depreciation |
| Individual vs corporate | Same §168(k) rules for both | Corporate exclusion directly confirmed by DFA guidance; individual treatment is inferred, not separately verified |
| Federal usability of the deduction | Subject to passive activity, at-risk, basis, and business-interest limits | Same federal limits govern the federal deduction; Arkansas's non-adoption applies independently |
Sources: Arkansas DFA — Corporation Income Tax Instructions, IRC §168(k). Federal bonus figures reflect current law; eligibility depends on acquisition and placed-in-service dates and elections.
Why there is no Arkansas add-back to track
Most decoupled states run an add-back-and-recover cycle: the federal bonus is added back to state income in Year 1, then returned through subtractions over later years. Arkansas does not work that way. Ark. Code Ann. §26-51-428 adopts IRC §§167 and 168(a)-(j) as those sections stood on January 1, 2019, and pointedly excludes subsection (k) — the bonus depreciation provision — from that adoption. Because the version of §168 Arkansas conforms to never contained a bonus allowance for this purpose, there is no bonus deduction to add back in Year 1 in the first place. The Arkansas depreciation schedule simply runs on ordinary MACRS from the start.
A note on how confident we are, and why: every raw Arkansas statute source was Cloudflare-blocked or defunct when this row was verified. The evidence behind this conclusion is the Arkansas Department of Finance and Administration's own Corporation Income Tax Instructions, which quote §26-51-428 by number and state in plain language that it "does not adopt the bonus depreciation provisions contained in Internal Revenue Code 168(k)." That is a direct, unambiguous statement from the taxing agency itself — strong evidence — but it is agency guidance, and this page attributes it that way rather than implying the statutory text was read directly.
The individual side carries its own caveat: §26-51-428 sits in the general computation-of-net-income subchapter and is not written as corporate-only, which points toward the same exclusion applying to individuals — but no individual-return instruction confirming identical wording could be located. Treat the individual answer as the likely one, not a separately confirmed one, and have your CPA verify it against the current Arkansas individual income tax forms.
Illustrative numbers: an Arkansas single-family rental
Using the single-family residential (SFR) band we publish — 9–32% of depreciable basis reclassified into 5/7/15-year property, 16% representative — on a property priced between $250,000 and $650,000, with a 20% residential land allocation, and 100% federal bonus depreciation for eligible components under current law:
| Line item | Federal | Arkansas |
|---|---|---|
| Purchase price band | $250,000–$650,000 | Same property |
| Depreciable basis (20% land allocation) | $200,000–$520,000 | Same basis |
| Reclassified to 5/7/15-yr (9–32% of basis) | $18K–$165K | Not adopted — no bonus to reclassify at accelerated Year-1 rates |
| Year-1 treatment | $18K–$165K deducted (100% bonus, if eligible) | Ordinary MACRS Year-1 depreciation only |
| Later-year treatment | Not applicable (already deducted) | Reclassified basis recovers over the remaining ordinary MACRS life — no add-back to unwind |
| Marginal tax rate | Up to 37% | Arkansas individual income tax rate (verify current year with the Arkansas DFA) |
| Illustrative Year-1 federal tax savings on reclassified components | ~$6,660–$61,570 (37% × $18K–$165K) | Fully intact — Arkansas's non-adoption has no federal effect |
Figures are illustrative and use the site's published SFR reclassification band; your result depends on your basis, land allocation, bracket, component mix, and eligibility. Whether the full federal deduction is usable in the current year still depends on your passive-loss, at-risk, basis, and business-interest situation.
See a sample cost segregation report
Look at exactly what your Arkansas study delivers: the component-by-component 5/7/15-year schedule, the Form 4562-ready numbers, and the documentation your CPA files. Real reports are our best answer to "is this legit?"
Forms your CPA files for an Arkansas property
For an Arkansas investor or business, the depreciation workflow is simpler than in an add-back-and-recover state, because there is no delayed amount to track over multiple years:
- Federal Form 4562: depreciation and amortization, including the §168(k) bonus deduction on eligible reclassified components. Flows to Schedule E (rental) or Schedule C (active business).
- Schedule E (or Schedule C): the accelerated federal deduction reduces federal taxable income in Year 1, subject to the federal passive-loss, at-risk, basis, and business-interest limits.
- Arkansas income tax return: depreciation is computed under §§167 and 168(a)-(j) as of 2019-01-01, without subsection (k) — ordinary MACRS from Year 1, per Ark. Code Ann. §26-51-428.
- Form 3115 §481(a) section: included only if this is a federal lookback method change on a property placed in service in a prior year (see below).
The reclassified schedule is the same engineered output for both books; the difference is that federal claims the Year-1 bonus while Arkansas simply never had it to claim.
Form 3115 lookback on an Arkansas property
If the property was placed in service in a prior tax year and depreciation was reported using a non-segregated method, a federal Form 3115 (Application for Change in Accounting Method) may allow a current-year §481(a) catch-up adjustment for the accelerated depreciation you missed, generally without amending prior returns. This is often the single biggest acceleration mechanism in cost segregation. Any catch-up dollars are illustrative and depend on placed-in-service date, prior depreciation claimed, bonus eligibility, land allocation, and component mix.
The federal §481(a) catch-up is the primary lever, and it remains subject to the federal passive-loss, at-risk, and basis limits. For Arkansas, the catch-up year's depreciation is computed the same way as any other year — under §§167 and 168(a)-(j) as of 2019-01-01, without subsection (k) — so there is no separate state add-back or recovery calculation layered on top.
See our full Form 3115 cost segregation guide for federal mechanics, partnership and LLC pass-through treatment, and timing rules.
Should you skip cost segregation in Arkansas? No.
Arkansas's non-adoption of §168(k) has zero effect on the federal return, which is where the dominant benefit sits. The math still favors doing the study, for three reasons:
- The full federal Year-1 bonus is intact. Arkansas's exclusion of §168(k) is a state-return matter only; the full §168(k) bonus is claimed on the federal return exactly as it would be anywhere else. How much you use in the current year still depends on your passive-loss, at-risk, basis, and business-interest situation.
- There is nothing to add back or unwind on the Arkansas return. Because Arkansas never adopted §168(k) for this purpose, there is no Year-1 addition and no multi-year subtraction schedule to track — just ordinary MACRS from the start.
- The Form 3115 lookback still captures missed federal years. If the property was placed in service in a prior year and depreciated without cost segregation, the federal §481(a) catch-up may be available, generally without amending prior returns.
The nuance to flag with your CPA is the evidence itself: this conclusion rests on Arkansas DFA guidance rather than a direct reading of the statute, and the individual-taxpayer answer is inferred from the corporate guidance rather than separately confirmed — both worth a quick check against current Arkansas forms before filing.
Frequently asked
Does Arkansas allow bonus depreciation?
No. Arkansas adopts IRC §§167 and 168(a)-(j) as those sections stood on January 1, 2019, and pointedly excludes subsection (k) — the federal bonus depreciation provision. An individual or business still claims the full federal Year-1 bonus on the federal return (100% may apply to qualified property acquired and placed in service after January 19, 2025, subject to §168(k) eligibility, related-party/prior-use, binding-contract, and election rules), but for Arkansas purposes depreciation is computed under ordinary MACRS from the start — there is no bonus to add back later because Arkansas never adopted it in the first place.
Is there an add-back-and-recover schedule for Arkansas, like some other decoupled states?
No, and this is a real difference worth understanding. Some decoupled states (Minnesota, Maine, Ohio) require the federal bonus to be added back in Year 1 and then recovered through subtractions in later years. Arkansas does not work that way: because Arkansas adopts a frozen, pre-bonus version of §168 for this purpose, the property is simply depreciated on the ordinary MACRS schedule from Year 1 onward on the Arkansas return. There is no addition to make and no later subtraction to track.
How solid is the evidence that Arkansas excludes §168(k)?
Strong, but it is worth being precise about what kind of evidence it is. Every raw Arkansas statute source was Cloudflare-blocked or defunct this session, so this page relies on the Arkansas Department of Finance and Administration's own Corporation Income Tax Instructions, which quote §26-51-428 by number and state directly that it "does not adopt the bonus depreciation provisions contained in Internal Revenue Code 168(k)." That is an unambiguous statement from the taxing agency itself — but it is agency guidance, not a citation to statutory text that was read directly, and this page says so rather than implying otherwise.
Does this apply the same way to individuals and to corporations?
The corporate answer is directly confirmed by DFA guidance. The individual answer is inferred, not separately verified: §26-51-428 sits in the general computation-of-net-income subchapter and is not written as corporate-only, which suggests it applies the same way to an individual return — but no individual-return instruction confirming identical wording could be reached this session. Treat the individual side as the likely answer rather than a separately confirmed one, and confirm with your CPA before filing.
Does Arkansas's §179 treatment affect the bonus depreciation answer?
No — keep the two separate. Arkansas adopts §179 (the separate expensing election) as of January 1, 2022, with its own Arkansas-specific phaseout. That is a distinct provision from §168(k) bonus depreciation and does not change the answer above: Arkansas still excludes bonus depreciation regardless of how §179 is treated.
Is cost segregation still worth it in Arkansas?
Yes, for the federal benefit — Arkansas's non-adoption of §168(k) does not touch the federal return at all. The full federal Year-1 bonus is still claimed federally; only the Arkansas-side depreciation schedule differs, computed under ordinary MACRS without the bonus from the start. Whether the full federal deduction is usable in the current year still depends on federal passive-activity, at-risk, basis, and business-interest limits.
Can I use Form 3115 on an Arkansas property I bought years ago?
Often, yes, at the federal level. If the property was placed in service in a prior tax year and depreciation was reported using a non-segregated method, a federal Form 3115 (Application for Change in Accounting Method) may allow a current-year §481(a) catch-up for the accelerated depreciation you missed, generally without amending prior returns. Any catch-up dollars are illustrative and depend on placed-in-service date, prior depreciation, bonus eligibility, land allocation, and component mix. Because Arkansas never adopted §168(k), the Arkansas-side depreciation for that same property continues under ordinary MACRS regardless of the federal catch-up.
Related guides
- Bonus depreciation by state: overview
- All 50 states: conformity reference table
- Minnesota bonus depreciation (decoupled, 80% add-back)
- Maryland bonus depreciation (decoupled, manufacturing carve-out)
- Form 3115 cost segregation lookback: §481(a) mechanics
- What is cost segregation: the full primer
- Sample cost segregation reports