Depreciation Calculator
Straight-line, declining balance, double-declining and sum-of-the-years'-digits depreciation with a full year-by-year schedule and book value at every point.
Depreciation Calculator: with the default inputs, first-year depreciation is $1,800.00.
Everything capitalized: purchase price plus freight, installation and anything needed to get it working.
What you expect to sell or scrap it for at the end of its useful life. Often zero.
- In words
- Straight-line: $1,800.00 in year 1, $9,000.00 over 5 years, ending book value $1,000.00.
- Depreciable base
- $9,000.00Cost minus salvage — the total that will be expensed, whatever the method.
- Straight-line equivalent
- $1,800.00The same base spread evenly, for comparison.
- First-year rate on cost
- 18%
- Book value at the year chosen
- $4,600.00
- Accumulated depreciation by then
- $5,400.00
- Total depreciation over the life
- $9,000.00
- Ending book value
- $1,000.00
- Year the asset is half written down
- 3The first year in which accumulated depreciation passes half the base.
Assumptions
- Full-year convention: a whole year of depreciation is taken in year one, with no half-year or mid-quarter proration.
- Book (GAAP) methods, not MACRS tax depreciation.
- Book value is floored at the salvage estimate; declining-balance charges are truncated in the final years to respect it.
- No mid-life changes to salvage value or useful life, and no impairment.
| Year | Book value at start | Depreciation | Accumulated | Book value at end |
|---|---|---|---|---|
| 1 | $10,000.00 | $1,800.00 | $1,800.00 | $8,200.00 |
| 2 | $8,200.00 | $1,800.00 | $3,600.00 | $6,400.00 |
| 3 | $6,400.00 | $1,800.00 | $5,400.00 | $4,600.00 |
| 4 | $4,600.00 | $1,800.00 | $7,200.00 | $2,800.00 |
| 5 | $2,800.00 | $1,800.00 | $9,000.00 | $1,000.00 |
Book value never falls below the salvage estimate; the last year of an accelerated method is truncated to make sure of it.
| Year | Straight-line | Double-declining | Sum-of-years |
|---|---|---|---|
| 1 | $1,800 | $4,000 | $3,000 |
| 2 | $1,800 | $2,400 | $2,400 |
| 3 | $1,800 | $1,440 | $1,800 |
| 4 | $1,800 | $864 | $1,200 |
| 5 | $1,800 | $296 | $600 |
All three columns total the same depreciable base. Only the timing differs — which is exactly why the choice affects reported profit but never lifetime profit.
How this is worked out
The formula
Depreciable base = cost − salvage value Straight-line: annual = (cost − salvage) ÷ useful life Declining balance: year n = book value at start × (factor ÷ life) Double-declining balance: factor = 2 Sum-of-the-years'-digits: year n = (life − n + 1) ÷ [life × (life + 1) ÷ 2] × (cost − salvage) Book value = cost − accumulated depreciation, floored at salvage value.
Open How it’s calculated above to see this worked through with your own numbers.
What you enter
- Cost of the asset
- Everything capitalized: purchase price plus freight, installation and anything needed to get it working.in dollars · 0 or more · defaults to 10000
- Salvage (residual) value
- What you expect to sell or scrap it for at the end of its useful life. Often zero.in dollars · 0 or more · defaults to 1000
- Useful life
- A number.from 1 to 100 · whole numbers only · defaults to 5
- Method
- Choose one of 4 options.Straight-line · Declining balance (choose the factor) · Double-declining balance (200%) · Sum-of-the-years'-digits
- Declining-balance factor(under More options)
- 1.5 is the 150% method; 2 is double-declining. Only used by the declining-balance method.from 0 to 5 · defaults to 1.5
- Switch to straight-line when it's larger(under More options)
- What MACRS does under the hood, so the asset finishes fully depreciated instead of trailing off.defaults to off
- Show book value at end of year(under More options)
- A number.from 0 to 100 · whole numbers only · defaults to 3
What you get back
- First-year depreciationmain answer
- In words
- Depreciable base
- Cost minus salvage — the total that will be expensed, whatever the method.
- Straight-line equivalent
- The same base spread evenly, for comparison.
- First-year rate on cost
- Book value at the year chosen
- Accumulated depreciation by then
- Total depreciation over the life
- Ending book value
- Year the asset is half written down
- The first year in which accumulated depreciation passes half the base.
What this assumes
- Full-year convention: a whole year of depreciation is taken in year one, with no half-year or mid-quarter proration.
- Book (GAAP) methods, not MACRS tax depreciation.
- Book value is floored at the salvage estimate; declining-balance charges are truncated in the final years to respect it.
- No mid-life changes to salvage value or useful life, and no impairment.
About this calculator
Depreciation spreads the cost of a long-lived asset across the periods it earns money in, because expensing a $10,000 machine entirely in the month you buy it would make that month look terrible and the next sixty look better than they are. The accounting question is never how much — every method here writes off the same cost minus salvage — it is only how fast.
The four methods
- Straight-line divides the base evenly. $10,000 with $1,000 salvage over five years is $1,800 a year. It's the default in most companies' books because it's simple and matches assets that wear out steadily.
- Declining balance applies a fixed rate to the remaining book value, so the charge shrinks every year. A 150% factor on a five-year asset is 30% a year.
- Double-declining balance is declining balance with a factor of 2 — 40% a year on a five-year asset. Front-loaded, and the usual choice for equipment that loses most of its value early or produces most of its output when new.
- Sum-of-the-years'-digits is accelerated but gentler: with a five-year life the digits sum to 15, so year one takes 5/15 of the base, year two 4/15, and so on.
How to use it
Enter cost — the full capitalized amount, including freight and installation, not just the invoice price — plus your salvage estimate and useful life. The schedule shows book value at the start and end of every year; the second table lines all three methods up side by side, which is the comparison that actually informs the choice. Under More options you can set a custom declining-balance factor, pick a year to spot-check book value, and turn on the switch to straight-line rule that stops a declining-balance asset trailing off forever without ever reaching salvage.
Where depreciation misleads
- Book value is not market value. A three-year-old truck at $3,000 net book value might fetch $12,000 or $800. Depreciation is a cost-allocation convention, not an appraisal.
- The method choice moves reported profit, never lifetime profit. Accelerated methods depress early earnings and flatter later ones. Comparing two companies' margins is meaningless if one uses double-declining and the other straight-line — check the accounting policy note.
- This is book depreciation, not your tax deduction. US tax depreciation runs on MACRS, with statutory recovery periods, half-year or mid-quarter conventions, and Section 179 or bonus depreciation that can expense an asset immediately. Most companies keep both sets of numbers, and the difference is what creates deferred tax.
- EBITDA adds all of this back, which is fine for comparing operations and dangerous as a proxy for cash: the machine still has to be replaced.
Frequently asked questions
▸Which depreciation method should I use?
Straight-line unless the asset genuinely loses value or usefulness faster early on — vehicles, computers, most production equipment. Whatever you pick, apply it consistently to a class of assets and disclose it; switching methods to manage earnings is a red flag to auditors.
▸Can book value go below salvage value?
No. Every method here stops once book value reaches the salvage estimate, which is why the final year of an accelerated schedule is often a stub amount. If the asset is genuinely worth less than its book value, that's an impairment, which is a separate write-down.
▸Is this the same as my tax depreciation?
No. US tax depreciation uses MACRS, with prescribed recovery periods and conventions, plus Section 179 expensing and bonus depreciation. These are the book (GAAP) methods used in financial statements. Most businesses maintain both.
▸What counts as the cost of the asset?
Everything needed to get it into service: invoice price, sales tax, freight, installation, testing. Ongoing repairs and maintenance are expensed, not capitalized; a major upgrade that extends useful life is capitalized.
▸Why does double-declining ignore salvage value in the rate?
Because it applies its rate to book value rather than to the depreciable base. Salvage still binds — the schedule simply stops depreciating once book value hits it, which is why the last year's charge is usually truncated.
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