Depreciation Calculator

Depreciable base = cost − salvage value; straight line: base ÷ useful life; declining balance: book value × (2 ÷ useful life), never below salvage value; sum of the years' digits: base × (remaining years ÷ sum of 1…n)

Cost

What the asset cost to acquire and put into service, including the amount paid for it and any costs needed to get it working. For most assets this is the invoice plus freight and installation, not the list price.

Salvage value

What you expect the asset to be worth when you stop using it. It is an estimate you supply, not something the calculator can look up, and it can be zero — which is the most common answer for equipment that is simply scrapped.

Useful life

How many years the asset will be used, in whole years. This is an accounting estimate of the period over which it earns revenue, which is usually shorter than how long it will physically last.

Book value

Cost minus everything written off so far. Declining balance charges a fixed percentage of this shrinking figure rather than of the original cost, which is what makes its charges fall year after year.

Sum of the years' digits

1 + 2 + … + n for an n-year life, so five years gives 15. Each year's charge is the depreciable base multiplied by the years remaining over that sum, which is why the first year gets 5/15 of the base and the last gets 1/15.

Use it when you need the annual charge rather than a resale value, which is a narrower question than it sounds. The two are often confused because both are described as what an asset loses each year, and they are not the same arithmetic: this page spreads a cost you already paid across a period you chose, while a market-value page tracks what someone would pay you today. Three things to get right. The method is a choice, not a fact — none of the three is more correct than the others, and the reason to pick one is the shape of the benefit: an asset that earns more in its early years, like a delivery vehicle or a machine that will be replaced by better technology, is better matched by a front-loaded method. Every figure here is an estimate built on two more estimates, the salvage value and the life, so a precise-looking annual charge can rest on a life that is wrong by years. And the last year is set to whatever book value is left rather than to the formula, so that all three methods land exactly on the salvage value instead of drifting a few cents away from it.

1. A 30,000 asset with a 3,000 salvage value over five years, straight line

   1. Depreciable base: 30,000 − 3,000 = 27,000
   2. Annual charge: 27,000 ÷ 5 = 5,400
   3. Every year gets 5,400, so the first year, the last year and the average are the same number: 5,400
   4. Total written off over the five years: 5,400 × 5 = 27,000

   The flat line is the whole point of this method: nothing about the asset's age changes the charge, which makes it the easiest to explain and the easiest to compare against a budget. Note that the 3,000 salvage value never appears as an expense — it stays on the books as the value you expect to recover at the end.

2. The same asset on declining balance at 200 percent

   1. Rate: 2 ÷ 5 = 40 percent of book value each year
   2. Year one: 30,000 × 40% = 12,000, leaving book value 18,000
   3. Year two: 18,000 × 40% = 7,200, then 4,320 in year three and 2,592 in year four
   4. Year five: the formula would give 3,888 × 40% = 1,555.20, but only 3,888 − 3,000 = 888 is left above salvage value, so the charge is 888
   5. Total: 12,000 + 7,200 + 4,320 + 2,592 + 888 = 27,000

   Compare the two rows that did not move: the total is still 27,000 and the average is still 5,400, while the first year went from 5,400 to 12,000 and the last from 5,400 down to 888. That is the whole trade — this method does not change how much is written off, only when. The final year's 888 is deliberately not the formula's 1,555.20: a shrinking percentage of a shrinking balance approaches the salvage value without ever reaching it, so the last year is set to whatever remains.

3. The same asset on the sum of the years' digits

   1. Digits: 1 + 2 + 3 + 4 + 5 = 15
   2. Year one takes 5/15 of the 27,000 base: 9,000
   3. Year two takes 4/15: 7,200, then 3/15 in year three and 2/15 in year four
   4. Year five takes 1/15: 1,800
   5. Total: 9,000 + 7,200 + 5,400 + 3,600 + 1,800 = 27,000

   Three methods, three first years — 5,400, 12,000 and 9,000 — against one unchanged total of 27,000. If you are choosing between them, the number to look at is the first-year charge, because that is where they disagree most and where the effect on a year's profit shows up. This method sits between the other two: declining balance front-loads harder, straight line does not front-load at all.

4. A cheap asset whose salvage value is half its cost

   1. Rate: 2 ÷ 3 = 66.67 percent of book value
   2. Year one: 1,000 × 66.67% = 666.67, but only 1,000 − 500 = 500 is above salvage value, so the charge is capped at 500
   3. Book value is now 500, which is the salvage value, so years two and three charge nothing
   4. Total: 500, and the average is 500 ÷ 3 = 166.67

   A high salvage value removes the front-loading that declining balance is chosen for: the asset starts out already close to the value you expect to recover, so there is very little to write off early. This is the case to check before assuming a front-loaded method will reduce this year's profit.

This is book depreciation — a rule for spreading a cost you already paid — and not a forecast of what the asset will be worth. An asset can be fully written off and still sell for real money, or still be on the books when nobody would buy it; the two figures answer different questions and nothing here reconciles them. It is also not tax depreciation. Real tax codes prescribe their own methods, lives and conventions, and the United States system in particular requires a half-year convention, a switch from declining balance to straight line, and asset-class lives that do not have to match the useful life you enter. All three methods here spread the same base over the same life, so they are interchangeable only in total, never in timing. Finally, both the salvage value and the life are estimates, and the calculator cannot tell you whether yours are reasonable.

What is depreciation?

It is the way the cost of an asset is charged against profit over the years the asset is used, instead of all at once in the year it was bought. A 30,000 delivery van expected to be worth 3,000 after five years has 27,000 of cost to spread, and straight line spreads it as 5,400 a year. The charge is not a payment — the money left your account when you bought the van — which is why a business can be profitable and still short of cash.

Which of the three methods should I use?

None of them is more correct than the others; the question is which one matches the pattern of benefit. If the asset earns roughly the same every year, straight line matches it and is the easiest to explain. If it earns more early on, because it is working harder while it is newer or because it will be replaced by better equipment, declining balance or sum of the years' digits matches it better. On the default 30,000 asset the first-year charge is 5,400 on straight line, 9,000 on sum of the years' digits and 12,000 on declining balance, so the choice is worth real money in any single year even though the total is identical.

Why does the final year not follow the formula?

Because declining balance on its own never reaches the salvage value. Each year charges a fixed percentage of a shrinking balance, and the last few years of that approach leave a small remainder: on the default asset the formula would charge 1,555.20 in year five and still leave value on the books, so a sixth charge would be needed to clear it. Setting the final year to whatever is left puts all three methods exactly on the salvage value and keeps the parts adding up to the total you see above them.

Is this the same as tax depreciation?

No, and the difference matters if you are filing. Tax systems prescribe their own methods and lives rather than letting you choose, and the United States system allows a different method depending on the asset class, requires a half-year convention so that a full year of depreciation is not claimed for an asset bought in December, and switches from declining balance to straight line partway through the life. A schedule from this page is a book schedule. Nothing here should be entered on a tax return without checking the rules that apply to you.

What if I get the salvage value or the useful life wrong?

Then the annual charge is wrong in the same direction, and no method choice compensates for it. Salvage value is subtracted up front, so overstating it by 2,000 removes 2,000 from everything that will ever be written off, spread across the life; overstating the life spreads the same total more thinly and makes each year look better than it is. Both are estimates, and the honest way to use the page is to run it twice with a pessimistic and an optimistic pair and look at how far apart the answers are.

Can the salvage value be zero, and can it be the whole cost?

Both are allowed here, and they mean opposite things. Zero salvage value is the normal case for equipment that gets scrapped, and it makes the whole cost depreciable — a 10,000 asset over five years at 2,000 a year. Setting salvage value equal to the cost says the asset will never lose value, so nothing is written off and all four figures come back as zero. The one input that is refused is a salvage value above the cost, because the depreciable base would go negative and the annual charge would be a negative expense, which is not a thing a schedule can produce.

• Publication 946 (2025), How To Depreciate Property — the tax rules this page is deliberately not: it sets out the Modified Accelerated Cost Recovery System, its recovery periods and the half-year convention that a book schedule does not use — Internal Revenue Service (United States)
• A Brief Overview of Depreciation — the recovery of the cost of property over its useful life, and the distinction between the accounting charge and the tax deduction — Internal Revenue Service (United States)
• 26 CFR § 1.167(a)-1, Depreciation in general — the regulation defining the depreciation deduction, the useful life over which it is allowed, and the salvage value that has to be accounted for — Legal Information Institute, Cornell Law School (United States Code of Federal Regulations)