Depreciation Calculator
$0.00 depreciation in year 1
| Year | Depreciation Expense | Accumulated Depreciation | Book Value |
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How Each Depreciation Method Works
Straight-line depreciation spreads the depreciable base (asset cost minus salvage value) evenly across the useful life, so every year's expense is identical. Declining balance methods instead apply a fixed percentage to the asset's remaining book value each year, front-loading larger deductions in early years and tapering off over time — double declining balance simply uses twice the straight-line rate as that percentage. Sum-of-the-years'-digits also accelerates depreciation, but does so with a shrinking fraction (remaining life divided by the sum of all years' digits) applied to the depreciable base. Whichever accelerated method you choose, this calculator stops reducing book value once it reaches the salvage value, since assets generally aren't depreciated below that floor.
Book Depreciation vs. Tax Depreciation
The methods above reflect standard financial-accounting depreciation, which is what shows up on a company's books and income statement. Tax depreciation is a different animal — in the U.S., most business assets are depreciated for tax purposes using MACRS schedules set by the IRS, which don't necessarily match any of the methods here and rarely use salvage value at all. If you're estimating a tax deduction rather than book value, treat this calculator as a starting point and verify against current IRS depreciation tables or a tax professional.
Why This Matters for Business Decisions
Depreciation isn't just an accounting formality — it directly affects reported profit, taxable income, and the book value used when you eventually sell or trade in an asset. If you're weighing whether to purchase equipment outright or finance it, pair this calculator with the business loan calculator to see how financing costs stack up against the depreciation benefit, or use the ROI calculator to evaluate the purchase as a whole.
Frequently Asked Questions
Which depreciation method should I use?
Straight-line is the simplest and most common for financial reporting since it spreads cost evenly. Declining balance and double declining balance are accelerated methods often chosen when an asset loses most of its value or usefulness early on, such as vehicles or technology equipment. Sum-of-the-years'-digits is another accelerated option that front-loads expense less aggressively than double declining balance.
Why does depreciation stop before book value reaches zero?
This calculator only depreciates an asset down to its salvage value, which is the estimated resale or scrap value at the end of its useful life. Accelerated methods in particular can mathematically overshoot this floor, so the calculator caps each year's expense to prevent book value from dropping below the salvage value you entered.