Depreciation Calculator

Depreciation allocates the cost of an asset over its useful life. Whether you're doing business accounting, filing taxes, or planning an equipment purchase, this calculator handles all major depreciation methods.

How to Use This Calculator

1. Enter the asset cost (purchase price).
2. Enter the salvage value (estimated value at end of useful life).
3. Enter the useful life in years.
4. Select the depreciation method.
5. Click Calculate for annual depreciation amounts and a year-by-year schedule.

Depreciation Methods

Straight-Line (SL): Equal annual depreciation.
Formula: (Cost − Salvage Value) ÷ Useful Life

Declining Balance (DB): Higher depreciation in early years.
Formula: Book Value at Start of Year × (1/Useful Life × Multiplier)

Double Declining Balance (DDB): Declining balance with 200% multiplier (2 × straight-line rate).

Sum of Years Digits (SYD): Accelerated; between SL and DDB in aggressiveness.

Example: Straight-Line

Asset cost: $50,000 | Salvage: $5,000 | Useful life: 5 years

• Annual depreciation: ($50,000 − $5,000) ÷ 5 = $9,000/year
• Year 1 book value: $50,000 − $9,000 = $41,000
• Year 5 (final) book value: $5,000 (salvage)

Example: Double Declining Balance

Same asset | DDB rate = 2 × (1/5) = 40%

• Year 1: $50,000 × 40% = $20,000
• Year 2: $30,000 × 40% = $12,000
• Year 3: $18,000 × 40% = $7,200
• Switch to SL in later years to ensure full depreciation to salvage value

Common Mistakes to Avoid

• Depreciating below salvage value — Stop depreciation when book value reaches salvage value.
• Using financial accounting method for taxes — The IRS requires specific methods (MACRS) for tax depreciation, which may differ from GAAP book depreciation.
• Forgetting Section 179 and bonus depreciation — Qualifying business assets may be fully expensed in year one under Section 179 (up to $1.22M in 2024) or bonus depreciation (60% in 2024, phasing down). Consult a tax advisor.

Frequently Asked Questions

What is MACRS depreciation?

The Modified Accelerated Cost Recovery System is the IRS-required depreciation method for tax purposes. It groups assets into property classes (5-year, 7-year, etc.) and applies specific depreciation tables.

Can land be depreciated?

No — land has indefinite useful life and cannot be depreciated. Only improvements to land (buildings, structures) are depreciable.

What is accumulated depreciation?

The total depreciation taken on an asset since purchase. Book value = Original cost − Accumulated depreciation. On the balance sheet, accumulated depreciation is a contra-asset account.

How does depreciation reduce taxes?

Depreciation is a non-cash expense that reduces taxable income. A $9,000 annual depreciation deduction in the 25% tax bracket saves $2,250 in taxes that year, even though no cash changes hands.

Conclusion

Accurate depreciation tracking is essential for financial statements, tax filings, and business decision-making. Use this calculator for any depreciation method and generate a full schedule for your records.

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