Depreciation Calculator
Calculate asset depreciation, annual expense, and book value.
Asset Information
Tax Considerations
Depreciation Summary
Average Annual Depreciation
Over 5 years
Current Book Value
Year 1
Total Tax Savings
At 25.00% tax rate
Present Value of Tax Savings
Discounted at 8% rate
Book Value After Useful Life
Final book value
Depreciation Methods Guide
Straight-Line:
Equal depreciation each year. Simple and commonly used for financial reporting.
Declining Balance:
Higher depreciation in early years. Good for assets that lose value quickly.
Sum of Years' Digits:
Accelerated method with declining annual amounts. Front-loads depreciation.
MACRS:
Required for US tax purposes. Provides specific depreciation schedules by asset class.
Section 179:
Allows immediate expensing of qualifying assets up to annual limits.
Bonus Depreciation:
Additional first-year depreciation for new assets. Percentages vary by year.
How it works
Depreciation spreads the cost of an asset over its useful life as it loses value. The simplest method, straight-line, writes off the same amount each year — the cost minus its salvage value, divided by the number of years.
Straight-line depreciation
Annual depreciation = (Cost − Salvage) ÷ Useful life
- Cost
- purchase price of the asset
- Salvage
- estimated value at end of life
- Useful life
- years of expected use
Worked example
- Equipment cost = $20,000
- Salvage value = $2,000
- Useful life = 6 years
- Annual = (20,000 − 2,000) ÷ 6
$3,000 of depreciation per year.
Good to know
- Other methods (declining balance, units of production) front-load or tie depreciation to usage — useful when value drops fast early.
- Depreciation is a non-cash expense that lowers taxable income for businesses.
- Book value falls by the depreciation each year until it reaches the salvage value.
Verwandte Rechner
Häufig gestellte Fragen
What is depreciation?
The accounting practice of spreading an asset's cost over its useful life as it loses value through use and age. Instead of expensing a $20,000 machine at purchase, a business deducts a portion each year it is in service.
How does straight-line depreciation work?
The simplest method: (cost − salvage value) ÷ useful life. A $20,000 machine with a $2,000 salvage value over 6 years depreciates $3,000 per year, reducing book value in equal annual steps.
What is declining-balance depreciation?
An accelerated method that applies a fixed percentage to the remaining book value each year, front-loading deductions — double-declining balance uses twice the straight-line rate. It suits assets like vehicles and computers that lose most value early.
What is salvage value?
The estimated amount an asset will be worth at the end of its useful life — what you could sell it for. Only the cost above salvage value is depreciated, and book value never falls below it.
Why does depreciation matter for taxes?
It is a non-cash expense that reduces taxable income each year an asset is in service. US tax depreciation follows MACRS schedules with set recovery periods rather than your book method, so the tax and accounting numbers often differ.