Depreciation Calculator

Calculate asset depreciation using multiple methods including straight-line, declining balance, and sum-of-years-digits. Get detailed depreciation schedules and visual charts to understand how your assets lose value over time.

Enter the original purchase price of the asset
Expected value at the end of useful life
Expected useful life in years
Choose the depreciation calculation method

How to Use the Depreciation Calculator

  1. Enter Asset Cost: Input the original purchase price or cost of the asset.
  2. Set Salvage Value: Enter the expected value of the asset at the end of its useful life.
  3. Define Useful Life: Specify how many years the asset will be useful for your business.
  4. Choose Method: Select the depreciation method that best fits your accounting needs.
  5. Calculate: Click the calculate button to generate the depreciation schedule and chart.
  6. Review Results: Analyze the annual depreciation amounts and cumulative depreciation over time.

The calculator provides a complete depreciation schedule showing year-by-year breakdown, making it easy to plan for tax purposes and financial reporting.

Depreciation Methods Explained

Straight-Line Depreciation

The straight-line method spreads the depreciation expense evenly over the asset's useful life. It's the simplest and most commonly used method.

Formula: Annual Depreciation = (Cost - Salvage Value) / Useful Life

Declining Balance Method

This accelerated depreciation method applies a fixed percentage to the asset's book value each year. Common rates include 200% (double declining) and 150% of the straight-line rate.

Formula: Annual Depreciation = Book Value × (Depreciation Rate / 100)

Sum-of-Years-Digits Method

Another accelerated method that applies a fraction based on the sum of years to the depreciable base. Higher depreciation in early years, lower in later years.

Formula: Annual Depreciation = (Remaining Life / Sum of Years) × (Cost - Salvage Value)

About This Depreciation Calculator

Our free online depreciation calculator helps businesses, accountants, and individuals calculate asset depreciation using various IRS-approved methods. Whether you're preparing tax returns, financial statements, or business plans, this tool provides accurate calculations and detailed schedules.

Key Features:

  • Multiple depreciation methods (Straight-line, Declining Balance, Sum-of-Years-Digits)
  • Complete year-by-year depreciation schedule
  • Visual chart showing depreciation trends
  • Mobile-responsive design for calculations on-the-go
  • Printable results for record keeping
  • No registration or payment required

Formula Used

Straight-Line Depreciation:

Annual Depreciation = (Asset Cost - Salvage Value) / Useful Life

Double Declining Balance:

Depreciation Rate = (2 / Useful Life) × 100%

Annual Depreciation = Book Value × Depreciation Rate

Sum-of-Years-Digits:

Sum of Years = n(n+1)/2 where n = Useful Life

Annual Depreciation = (Remaining Life / Sum of Years) × Depreciable Base

Use Cases and Applications

  • Business Accounting: Calculate depreciation for financial statements and tax reporting
  • Tax Planning: Optimize tax deductions through strategic depreciation methods
  • Asset Management: Track asset values and plan for replacements
  • Investment Analysis: Evaluate the financial impact of asset purchases
  • Budgeting: Forecast future depreciation expenses
  • Loan Applications: Provide depreciation schedules for financing

Examples

Example 1: Office Equipment

Asset: Computer Equipment

Cost: $5,000

Salvage Value: $500

Useful Life: 5 years

Method: Straight-Line

Annual Depreciation: ($5,000 - $500) / 5 = $900 per year

Example 2: Manufacturing Equipment

Asset: Industrial Machine

Cost: $50,000

Salvage Value: $5,000

Useful Life: 10 years

Method: Double Declining Balance

Year 1 Depreciation: $50,000 × 20% = $10,000

Example 3: Vehicle

Asset: Delivery Truck

Cost: $30,000

Salvage Value: $3,000

Useful Life: 6 years

Method: Sum-of-Years-Digits

Sum of Years: 6+5+4+3+2+1 = 21

Year 1 Depreciation: (6/21) × $27,000 = $7,714

Frequently Asked Questions (FAQ)

What is depreciation?
Depreciation is the systematic allocation of the cost of a tangible asset over its useful life. It represents the decline in value of an asset due to wear, tear, obsolescence, or other factors. Businesses use depreciation to match the cost of assets with the revenues they generate over time.
Which depreciation method should I use?
The choice depends on your business needs and tax strategy. Straight-line is simple and spreads costs evenly. Accelerated methods (declining balance, sum-of-years-digits) provide higher deductions in early years, which can be beneficial for tax purposes and when assets lose value quickly.
What is salvage value?
Salvage value is the estimated value of an asset at the end of its useful life. It's the amount you expect to receive when you sell or dispose of the asset. Some assets may have zero salvage value if they're expected to have no value at the end of their useful life.
Can I change depreciation methods?
Generally, once you choose a depreciation method for an asset, you must continue using that method for the life of the asset. However, there are specific circumstances where changes may be allowed. Consult with a tax professional for guidance on your specific situation.
How do I determine useful life?
Useful life is typically determined by IRS guidelines, manufacturer specifications, or your business experience with similar assets. Common useful lives include: computers (3-5 years), office furniture (7 years), vehicles (5 years), and buildings (27.5-39 years depending on type).
Is this calculator suitable for tax purposes?
This calculator provides general depreciation calculations based on standard methods. For tax purposes, you should consult current IRS publications and consider factors like bonus depreciation, Section 179 deductions, and specific tax regulations. Always verify calculations with a tax professional.