Depreciation Calculator
Methods
• Straight-Line: (Initial - Salvage) / Useful Life
• Declining Balance: Book Value × Rate
About This Calculator
This depreciation calculator helps you move from raw inputs to a decision-ready output in seconds.
Calculate asset depreciation using straight-line, declining balance, or sum-of-years-digits methods. Generate a full depreciation schedule for financial reporting, tax planning, and business accounting.
If your workflow expands, pair this calculator with ROI Calculator and Break-Even Point Calculator to cross-check assumptions and build a stronger analysis chain.
Formula
Straight-line: Annual depreciation = (Cost − Salvage) / Useful life. Declining balance: Depreciation = Book value × Rate. Sum-of-years-digits: Depreciation = (Cost − Salvage) × (Remaining life / Sum of years).
Example Calculation
The worked example below demonstrates how the input fields translate into the final output. Use it as a quick validation pass before entering your own numbers.
- cost: 50000
- salvage value: 5000
- useful life (years): 5
- method: Straight-line
Explanation of Results
Result Interpretation
Straight-line depreciation: ($50,000 − $5,000) / 5 = $9,000 per year. After 5 years the book value equals the $5,000 salvage value. Each year the asset loses the same dollar amount, making budgeting straightforward.
FAQ
What is straight-line depreciation?
Straight-line depreciation spreads the cost evenly over an asset's useful life: Annual depreciation = (Cost − Salvage value) / Useful life in years. It's the simplest method and used most often for financial reporting under GAAP. Example: a $20,000 machine with $2,000 salvage and 9-year life depreciates $2,000/year.
What is double declining balance depreciation?
Double declining balance (DDB) accelerates depreciation — the asset loses more value early in its life. Rate = 2 / Useful life. Applied to book value each year (not original cost). For a 5-year asset: rate = 40%. Year 1: 40% × cost, Year 2: 40% × remaining book value, and so on. Often switches to straight-line in later years to ensure full depreciation.
Which depreciation method should I use for taxes?
In the US, the IRS uses MACRS (Modified Accelerated Cost Recovery System), which is not a simple declining balance — it uses specific tables by asset class. MACRS front-loads deductions, reducing taxable income earlier. Consult IRS Publication 946 or a tax advisor. This calculator uses standard accounting methods useful for financial statements and internal planning.
What is salvage value in depreciation?
Salvage value (residual value) is the estimated worth of an asset at the end of its useful life. It's subtracted from the original cost before calculating depreciation — you only depreciate the cost you expect to 'use up.' If you buy equipment for $30,000 and expect to sell it for $3,000 in 5 years, you depreciate $27,000 total.
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