Depreciation Calculator
Calculate annual depreciation of an asset using straight-line or declining balance methods. Useful for accounting, tax, and business planning.
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How to use this calculator
Straight-line spreads cost evenly each year. Declining balance applies a fixed rate to the reducing book value each year.
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Enter the original cost of the asset.
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Enter the estimated salvage (residual) value at end of useful life.
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Enter the useful life in years.
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Choose straight-line for equal annual deductions or double declining balance for faster early depreciation.
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See your annual depreciation amount and book value.
Frequently asked questions
What is salvage value?
Salvage value (also called residual or scrap value) is the estimated worth of an asset at the end of its useful life. It reduces the total depreciable amount. If an asset has no resale value, salvage value is zero.
When should I use declining balance instead of straight-line?
Use declining balance when the asset is most useful early in its life (vehicles, tech equipment). It gives larger deductions in earlier years, which can be tax-advantageous. Straight-line suits assets that depreciate evenly over time (buildings, furniture).
What is bonus depreciation and Section 179?
In the US, Section 179 allows businesses to deduct the full cost of qualifying equipment in year 1 rather than depreciating it. Bonus depreciation (often 60–80%) allows partial first-year deduction. Both reduce taxable income immediately — consult a tax professional.
Is depreciation a cash expense?
No — depreciation is a non-cash accounting expense. It reduces reported profit and taxes but does not involve an actual cash payment (the cash was spent when the asset was purchased). This is why depreciation is added back in cash flow statements.
Depreciation methods for business assets
Straight-line depreciation
The most common method. Equal annual deductions over the asset's useful life. Example: a $50,000 machine with $5,000 salvage value and 5-year life = $9,000/year depreciation. Simple to calculate and audit, preferred for reporting purposes.
Double declining balance depreciation
Doubles the straight-line rate and applies it to the declining book value. A 5-year asset uses a 40% rate (2 × 20%). Year 1 on $50,000: $20,000 depreciation. Year 2 on $30,000: $12,000. This front-loads deductions, reducing taxable income in early years.
Depreciation in financial statements
Depreciation appears on the income statement as an operating expense (reducing profit) and on the balance sheet as accumulated depreciation (reducing the asset's net book value). A fully depreciated asset has a book value equal to its salvage value but may still be in use.
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Results are estimates for informational purposes only and do not constitute professional financial, medical, legal, or technical advice. Read full disclaimer →