Calculate asset depreciation using the Straight Line, Declining Balance (including Double Declining), or Sum of the Years' Digits methods. This calculator also supports partial-year depreciation with multiple accounting conventions. 100% free, private, and runs entirely in your browser.
| Year | Beginning Book Value | Depreciation Expense | Accumulated Depreciation | Ending Book Value |
|---|
Depreciation is an accounting method used to allocate the cost of a tangible asset over its useful life. When a business purchases a long-term asset — such as machinery, vehicles, equipment, or buildings — the entire cost is not expensed immediately. Instead, the cost is spread across the years the asset is expected to generate revenue.
Conceptually, depreciation also reflects the reduction in an asset's value over time due to wear and tear, obsolescence, or market conditions. For example, a delivery truck loses value each year as it accumulates mileage, and a computer becomes less valuable as newer models are released.
In the United States, depreciation is tax-deductible for businesses, making it an important tool for reducing taxable income. The IRS publishes guidelines (such as MACRS — Modified Accelerated Cost Recovery System) for how different asset classes should be depreciated.
The total amount depreciated over an asset's life is identical regardless of the method used. Only the timing of the depreciation changes. Different methods suit different asset types and business strategies.
The simplest and most widely used method. It spreads the depreciable amount evenly across each year of the asset's useful life. Best for assets that provide consistent value over time, such as buildings or furniture.
An accelerated method that records higher depreciation in earlier years. This matches the reality that many assets (like vehicles or technology) lose value faster when new. The depreciation rate is applied to the book value (not the original cost) each year.
The most common variant is Double Declining Balance (DDB), where the factor is 2. Note: Under this method, salvage value is not subtracted from the initial cost, but depreciation stops once the book value reaches the salvage value.
Another accelerated method. It applies a declining fraction to the depreciable base each year, with the fraction's numerator decreasing by 1 each year and the denominator equal to the sum of all digits of the useful life.
For example, with a 5-year life: SYD = 1+2+3+4+5 = 15. Year 1 factor = 5/15, Year 2 = 4/15, and so on.
This method bases depreciation on actual usage rather than time. It is useful for assets like manufacturing equipment or vehicles where usage varies significantly year to year.
Assets are rarely purchased exactly on the first day of the accounting year. When an asset is placed in service mid-year, different accounting conventions determine how much depreciation to record in the first (partial) year.
Salvage value (also called residual value or scrap value) is the estimated amount an asset will be worth at the end of its useful life. It represents what you could reasonably expect to recover by selling, trading in, or scrapping the asset.
In most depreciation methods, the salvage value is subtracted from the asset cost to determine the depreciable base. For example:
An asset with a $10,000 cost and $1,000 salvage value has a depreciable base of $9,000. At the end of its useful life, the asset's book value will equal $1,000.
Note on Declining Balance: Unlike Straight Line or SYD, the declining balance method does not subtract salvage value from the initial cost. Instead, depreciation is applied to the book value until it reaches salvage value, at which point depreciation stops.
Companies use depreciation to accurately reflect the cost of using long-term assets in their income statements. This is required under both GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards).
In many jurisdictions, businesses can choose an accelerated depreciation method to reduce taxable income in the early years of an asset's life. This improves cash flow and can be reinvested. In the US, the IRS uses MACRS, which specifies recovery periods and conventions for different asset classes.
Freelancers, small business owners, and independent contractors use depreciation to deduct the cost of equipment, vehicles, and home offices. Even personal assets like rental properties are depreciated for tax purposes.
By modeling depreciation, companies can predict when an asset's book value will drop low enough to justify replacement. Accelerated methods show this "crossover point" sooner, which is often the desired behavior for high-tech assets.
It depends on the asset and your goal. Straight Line is best for assets that provide consistent value (buildings, furniture). Accelerated methods (Declining Balance, SYD) are better for assets that lose value quickly (vehicles, computers, machinery). For tax purposes, consult your local tax authority's guidelines — in the US, that's typically MACRS.
Double Declining Balance (DDB) is simply Declining Balance with a depreciation factor of 2, meaning the rate is twice the straight-line rate. In our calculator, you can set the factor to any value. Common factors include 1.5 (150% declining balance) and 2.0 (200% or double declining balance).
Depreciation expense cannot be negative. Once an asset's book value reaches its salvage value, depreciation stops. In some cases (especially with DDB), the calculated depreciation may exceed the remaining depreciable amount, in which case it is capped to bring the book value exactly to salvage value.
Partial-year depreciation does not change the total amount depreciated over the asset's life — it only shifts the timing. In the first year, you claim a partial amount based on the convention. The remaining amount is depreciated over the remaining years, potentially extending into a year beyond the original useful life.
No. Land is considered to have an indefinite useful life and is not depreciated. However, improvements to land (like buildings, fences, or landscaping) can be depreciated. When you buy property, the purchase price is typically split between land (non-depreciable) and improvements (depreciable).
Section 179 is a US tax code provision that allows businesses to deduct the full purchase price of qualifying equipment and software in the year it's purchased, rather than depreciating it over time. It's essentially an immediate expensing rule. Bonus depreciation is a similar concept that allows a percentage of the cost to be deducted immediately. Consult a tax professional for details.
Depreciation itself is a non-cash expense — it reduces reported profit but does not involve an actual cash outflow. However, it does affect cash flow indirectly: by reducing taxable income, it lowers the tax bill, which increases after-tax cash flow. This is why depreciation is often called a "tax shield."
This calculator is designed for educational and planning purposes. While it uses standard depreciation formulas, actual tax depreciation may involve additional rules (such as MACRS tables, mid-quarter conventions, or bonus depreciation) that are not modeled here. Always consult a qualified tax professional for tax filing.
This depreciation calculator runs entirely in your browser using JavaScript. No data is sent to any server. All calculations happen locally on your device. Your financial and asset information never leaves your computer, making this tool completely private and secure.
You can even use this calculator offline — just save the page to your device.