Depreciation Calculator
Calculate asset depreciation using multiple accounting methods
Depreciation Methods Comparison
Straight-Line
Equal expense each year. Simplest and most common method.
Declining Balance
Fixed percentage of book value. Higher early depreciation.
Double Declining
Twice the straight-line rate. Accelerated depreciation.
Sum-of-Years' Digits
Weighted fraction. Higher expense in early years.
How to Use This Depreciation Calculator
- Enter the asset's original cost (purchase price plus any setup costs)
- Input the salvage value (estimated value at end of useful life)
- Set the useful life in years based on IRS guidelines or your estimate
- Select a depreciation method appropriate for your asset and purpose
- For declining balance, optionally adjust the declining rate percentage
- Click 'Calculate Depreciation' to see the annual schedule
Example: A $50,000 delivery truck with $5,000 salvage value over 5 years. Straight-line: $9,000/year. Double declining: Year 1 = $20,000, Year 2 = $12,000, Year 3 = $7,200, then levels off. DDB front-loads deductions for faster tax benefits.
Tip: For tax purposes, you may need to use MACRS (Modified Accelerated Cost Recovery System) instead of these methods. Consult IRS Publication 946 or a tax professional.
Why Use a Depreciation Calculator?
Depreciation affects your taxes, financial statements, and business planning. Getting it right impacts cash flow and asset replacement decisions.
- Calculate annual depreciation expense for financial statements
- Plan for asset replacement by tracking remaining book value
- Compare methods to understand tax implications
- Create depreciation schedules for multiple assets
- Estimate the book value of equipment for sale or trade-in
- Understand how different methods impact reported profits
Understanding Your Results
Compare methods to see how depreciation is distributed over the asset's life and impacts each year's expense.
| Result | Meaning | Action |
|---|---|---|
| Straight-line chosen | Equal annual expense | Best for assets that provide consistent value over time |
| DDB or Declining chosen | Higher early-year expense | Best for assets that lose value quickly or for tax optimization |
| Sum-of-years chosen | Graduated decline | Middle ground between straight-line and aggressive methods |
| Book value reaches salvage | Fully depreciated | Asset can still be used but has no remaining depreciable value |
Meaning: Equal annual expense
Action: Best for assets that provide consistent value over time
Meaning: Higher early-year expense
Action: Best for assets that lose value quickly or for tax optimization
Meaning: Graduated decline
Action: Middle ground between straight-line and aggressive methods
Meaning: Fully depreciated
Action: Asset can still be used but has no remaining depreciable value
Note: Book depreciation (for financial statements) can differ from tax depreciation (for IRS). Many businesses keep two sets of records.
About Depreciation Calculator
Formula
Straight-Line: (Cost - Salvage) / Useful Life | DDB: Book Value × (2 / Useful Life) Straight-line produces equal annual amounts. DDB applies double the straight-line rate to the declining book value, creating larger early deductions that shrink over time.
Current Standards: IRS useful life guidelines (examples): Office furniture 7 years, Computers 5 years, Vehicles 5 years, Commercial buildings 39 years. Section 179 allows immediate expensing up to $1,220,000 for qualifying assets in 2026.
Frequently Asked Questions
Which depreciation method should I use?
For financial statements: straight-line is most common because it's simple and produces consistent expense. For tax purposes: consult a tax professional about MACRS, Section 179, or bonus depreciation, which often provide larger early deductions. For internal decision-making: use whichever method best reflects how the asset actually loses value. A computer losing value rapidly might warrant DDB; office furniture staying useful for years suits straight-line.
What's the difference between book and tax depreciation?
Book depreciation (for GAAP financial statements) uses methods that best match expense to asset usage. Tax depreciation (for IRS) uses MACRS, Section 179, and bonus depreciation rules that often accelerate deductions for economic stimulus. A company might depreciate a $100,000 asset over 10 years straight-line for books while taking the full $100,000 as a Section 179 deduction in year one for taxes. This creates a 'timing difference' that reverses over time.
What is salvage value and how do I estimate it?
Salvage value (also called residual value) is what you expect the asset to be worth when you stop using it—either its trade-in value, scrap value, or sale price. For tax MACRS calculations, salvage value is typically ignored (assumed zero). For book purposes, research resale markets for similar used assets. Conservative estimates are safer than optimistic ones. If uncertain, zero is acceptable for most assets.
Can I change depreciation methods?
Changing methods mid-stream is allowed but requires justification and disclosure. For financial statements, a change must be reported as a change in accounting estimate with explanation. For taxes, IRS Form 3115 is required for most changes and has specific rules about how to handle the transition. Generally, pick your method carefully upfront—changes create complexity and scrutiny.
What assets can't be depreciated?
Land can never be depreciated because it doesn't wear out. Inventory isn't depreciated (it's expensed when sold). Assets used less than a year are typically expensed immediately. Personal-use assets don't qualify for business depreciation. Assets must be used in business or held for income production to qualify. If an asset serves both personal and business purposes, only the business-use percentage can be depreciated.