Depreciation Calculator

A depreciation calculator spreads an asset's cost across its useful life instead of expensing it all at once. Straight-line depreciation equals (cost − salvage) ÷ useful life: a $50,000 machine with a $5,000 salvage value and a 5-year life depreciates $9,000 per year. This tool also runs double-declining balance and builds a full year-by-year book value schedule; the example above is its default input.

Depreciation is one of the most important concepts in business accounting because it follows the matching principle: the cost of a long-lived asset should be recognized over the same periods that benefit from using it, not all at once. This tool handles two standard book methods, straight-line and double-declining balance, and produces the schedule you would put on a balance sheet.

Depreciation is a cost-accounting tool: it writes assets down over time. For the tax side, the Section 179 Calculator estimates a first-year write-off with Section 179 and bonus depreciation; to see how depreciation is added back when you measure operating earnings, use the EBITDA Calculator; and to judge whether an equipment purchase earns back its cost, try the Payback Period Calculator.

The depreciation formulas

The two methods this calculator supports use different formulas. Straight-line is the simplest:

Every year is identical, so the asset loses value in a straight line, hence the name. Double-declining balance (DDB) is an accelerated method that front-loads the expense:

Two things make DDB different from straight-line. First, the rate is applied to the asset's current book value, not to the depreciable base, so salvage value does not appear in the formula. Second, because book value shrinks every year, the dollar amount of depreciation shrinks too. A pure declining balance never quite reaches the salvage value on its own, so the calculator switches to straight-line over the remaining life in the first year that straight-line gives the larger deduction, the same switch MACRS uses for tax depreciation. That way book value lands exactly on the salvage value at the end of the useful life.

Depreciation rate by useful life: straight-line, 150% DB and double-declining

The depreciation rate is set entirely by useful life. Straight-line is 1 ÷ life, 150% declining balance is 1.5 ÷ life, and double-declining (200% DB) is 2 ÷ life. Declining-balance rates apply to the current book value, not the depreciable base.

Key terms you need to know

• Cost: the total amount you paid to acquire the asset and get it ready for use: purchase price plus shipping, installation, and setup.
• Salvage value: also called residual or scrap value, this is the estimated amount the asset will be worth at the end of its useful life. It is the floor that book value cannot drop below. (MACRS tax depreciation does not use salvage value.)
• Useful life: the number of years you expect to use the asset productively. For tax purposes the IRS assigns recovery periods by property class.
• Depreciable base: cost minus salvage value, the total amount that will be expensed over the asset's life.
• Book value: the asset's carrying value at any point in time: cost minus accumulated depreciation. It starts at cost and ends at salvage value.
• Accumulated depreciation: the running total of all depreciation taken so far, shown as a contra-asset on the balance sheet.

How to use this depreciation calculator

You only need four inputs to get a full schedule. Work through the fields in order:

1. Asset cost: enter the total purchase price, including delivery and installation costs that were needed to put the asset into service.
2. Salvage value: estimate what the asset will be worth at the end of its useful life. Enter $0 if you expect it to be worthless or fully written off.
3. Useful life: type the number of years you will use the asset, from 1 to 100. Half years work, so a 27.5-year life gives 27 full years and a final half year.
4. Method: choose straight-line for even, predictable expense, or double-declining balance for larger early-year deductions.

The big number at the top is the annual depreciation (for straight-line) or the first-year depreciation (for DDB, which then declines). Below it, the schedule shows each year's depreciation, the accumulated total, and the remaining book value, updating as you type.

Worked example 1: straight-line

A landscaping company buys a $50,000 mini-excavator, expects to use it for 5 years, and estimates a $5,000 resale value. The depreciable base is $50,000 − $5,000 = $45,000, so the annual depreciation is $45,000 ÷ 5 = $9,000 per year. After year one the book value is $41,000; after year five it is exactly $5,000, the salvage value. Every year's expense is identical, which makes budgeting and forecasting simple.

Annual straight-line depreciation by asset cost and useful life

Use this matrix to read off the annual straight-line expense for a given asset cost and useful life. It assumes a $0 salvage value, so each cell is simply cost ÷ life; subtract any salvage value from the cost before reading across.

Worked example 2: double-declining balance

Take the same $50,000 excavator with a 5-year life. The DDB rate is 2 ÷ 5 = 40%. Year one depreciation is 40% × $50,000 = $20,000, leaving a book value of $30,000. Year two is 40% × $30,000 = $12,000, leaving $18,000. Year three is 40% × $18,000 = $7,200, leaving $10,800, and so on, each year smaller than the last. Compared with the flat $9,000 under straight-line, DDB lets the business deduct $20,000 in year one, which can be valuable when an asset earns the most when it is new.

Accumulated depreciation and book value schedule (declining balance)

This is the full year-by-year schedule for that same $50,000 asset ($5,000 salvage, 5-year life, 40% rate). Each year's depreciation is added to accumulated depreciation, and the remaining book value (the asset's depreciated value = cost − accumulated depreciation) lands exactly on the $5,000 salvage value in year five.

*Year five is capped so book value lands exactly on the $5,000 salvage value; a straight 40% would have taken $2,592.

When salvage is $0: the switch to straight-line

Run the same excavator with a $0 salvage value and pure double-declining balance would never finish the job: 40% of a shrinking balance leaves $3,888 still on the books after five years. That is why the calculator, like MACRS, switches to straight-line once straight-line over the remaining life gives the larger deduction. In year 4 the book value is $10,800 with two years left, so straight-line gives $10,800 ÷ 2 = $5,400 against a DDB amount of $4,320, and the schedule switches:

Total depreciation is $50,000, the full cost, and 64% of it ($32,000) still lands in the first two years.

Straight-line vs. double-declining balance, side by side

Here is how the two methods compare for the $50,000 asset with a 5-year life and $5,000 salvage. Both depreciate the asset down to its salvage value, but the timing of the expense is very different:

*The final DDB year is reduced so book value lands exactly on the $5,000 salvage value rather than overshooting it.

IRS recovery periods (common property classes)

If you are calculating depreciation for U.S. federal taxes, you generally use the recovery period the IRS assigns to each property class under the General Depreciation System (GDS) of MACRS rather than an estimated useful life. Examples from IRS Publication 946:

Machinery and equipment are classed by the business activity they are used in, so their recovery period varies; look up the asset class in Appendix B of Publication 946. Real property uses the mid-month convention, and personal property generally uses the half-year convention, explained below.

MACRS depreciation rates (IRS Table A-1, half-year convention)

For tax depreciation of most business equipment you do not compute a rate yourself; you multiply the asset's unadjusted basis by the percentage the IRS publishes for each year. These are the Table A-1 percentages from Publication 946 for property under the half-year convention, which treats an asset as placed in service halfway through the first year and therefore adds one extra year at the end:

Example: a $50,000 piece of 5-year property (say a work truck) placed in service under the half-year convention, with no Section 179 or bonus depreciation, is depreciated $10,000, $16,000, $9,600, $5,760, $5,760 and $2,880 over six tax years, exactly $50,000 in total. Three rules make MACRS different from the book methods above: salvage value is not used; the switch from declining balance to straight-line is built into the percentages; and if more than 40% of the depreciable basis of the year's personal property is placed in service in the last three months of the tax year, the mid-quarter convention (Tables A-2 to A-5) replaces the half-year convention. Real property uses the mid-month convention instead.

Section 179 and bonus depreciation in 2025 and 2026

Two provisions let businesses deduct much or all of an asset's cost in the first year instead of spreading it out, and both were changed by P.L. 119-21, the One Big Beautiful Bill Act. According to IRS Publication 946:

• Section 179: the maximum deduction is $2,500,000 for tax years beginning in 2025, reduced dollar for dollar once the cost of qualifying property placed in service during the year exceeds $4,000,000. For tax years beginning in 2026 the inflation-adjusted figures are $2,560,000 and $4,090,000.
• Bonus (special) depreciation: P.L. 119-21 reinstated a 100% allowance for qualified property acquired and placed in service after January 19, 2025, with an election to take 40% instead in the first tax year ending after that date. Qualified property acquired before January 20, 2025 and placed in service in 2025 is limited to 40%.

Whatever is left after Section 179 and bonus depreciation is depreciated under MACRS. Estimate the first-year deduction with the Section 179 Calculator, and report it on Form 4562. These tax rules do not change your book depreciation, which is why many businesses keep separate book and tax schedules.

Who this calculator is for

• Small-business owners estimating the annual expense of equipment, vehicles, or technology purchases.
• Bookkeepers and accountants building a quick depreciation schedule for the books or a fixed-asset register.
• Students learning the difference between straight-line and accelerated depreciation for an accounting or finance course.
• Landlords and real-estate investors getting a feel for how a long-lived asset such as a 27.5-year rental building is written down over time.
• Anyone budgeting who wants to understand the non-cash expense that lowers reported profit without affecting cash.

Why depreciation matters

Depreciation affects three things at once. It lowers reported net income on the income statement (it is an expense), it reduces the asset's book value on the balance sheet, and because tax depreciation is deductible, it reduces taxable income and the cash you owe in tax. Crucially, depreciation is a non-cash expense: no money changes hands when you record it. That is why analysts often add it back when looking at cash flow, and why two companies with identical cash positions can report very different profits depending on their depreciation method.

How the schedule is used in real life

The numbers this calculator produces flow straight into your financial statements and planning. Each year's depreciation expense appears on the income statement, lowering net income. The accumulated depreciation total and the resulting book value sit on the balance sheet as a contra-asset and the asset's carrying value. Lenders and investors read those figures to judge how old a company's asset base is and how much reinvestment may be coming. Internally, the schedule helps you plan: when an asset is nearly fully depreciated, it is often a signal to budget for a replacement. And because depreciation is added back on the cash-flow statement, the schedule is also a starting point for estimating free cash flow. Keeping an accurate, consistent schedule, rather than guessing the expense each year, is what makes the rest of these numbers reliable.

Choosing between the methods

There is no single "right" method; it depends on how the asset loses value and what you want your financials to show:

• Choose straight-line when the asset delivers steady value over its life (buildings, furniture, fixtures) and you want predictable, easy-to-explain expense.
• Choose double-declining balance when an asset is most productive when new and loses value fast (vehicles, computers, machinery), or when you want larger expense early.
• For tax, the IRS prescribes MACRS (plus optional Section 179 and bonus depreciation) regardless of your book choice, so many businesses keep two sets of depreciation records: book and tax.

What changes the schedule the most

If you adjust the inputs and watch the schedule move, a few levers dominate the outcome:

• Asset cost: the single biggest driver. It sets the starting book value and, under straight-line, scales the annual expense directly.
• Useful life: a longer life spreads the same depreciable base over more years, so each year's expense is smaller. Under DDB it also lowers the rate (2 ÷ life), softening the early-year expense.
• Salvage value: a higher salvage value shrinks the depreciable base and raises the floor where DDB stops, so less total depreciation is recorded.
• Method: straight-line and DDB reach the same total, but DDB front-loads it: in the default example, $32,000 of the $45,000 (about 71%) lands in the first two years under DDB, against $18,000 (40%) under straight-line.

Because the method only changes timing, the choice does not affect the total, but it can swing reported profit by thousands of dollars in any single year.

Depreciation vs. amortization vs. depletion

Depreciation is one of three closely related ways accountants spread a cost over time, and they are easy to mix up:

• Depreciation applies to tangible long-lived assets (machinery, vehicles, equipment, and buildings) that wear out or become obsolete.
• Amortization applies the same matching idea to intangible assets such as patents, software, trademarks, and goodwill, usually on a straight-line basis. The loan version of amortization (splitting payments into principal and interest) is a different use of the word; see the Amortization Calculator.
• Depletion applies to natural resources like timber, oil, and minerals, allocating cost as the resource is physically used up.

All three are non-cash expenses that lower reported profit and, where deductible, taxable income. Depreciation is simply the version that covers the physical assets most businesses own.

How depreciation fits the rest of your numbers

Depreciation rarely lives in isolation; it feeds into the broader picture of what your assets cost and earn. When a purchase is large enough to finance, the Business Loan Calculator shows the monthly payment alongside the depreciation expense, and the ROI Calculator and Payback Period Calculator help decide whether the asset pays for itself. The Break-Even Calculator treats depreciation as part of the fixed costs you must cover, and the EBITDA Calculator adds it back to show operating earnings before non-cash charges. For product pricing, the Profit Margin Calculator shows how much of each sale is left after costs.

Limitations and assumptions

• This is book depreciation, not a tax filing. The calculator does not apply MACRS half-year, mid-quarter or mid-month conventions; use the Table A-1 percentages above for tax.
• It assumes the asset is placed in service at the start of year 1 (no first-year proration); a fractional useful life simply ends with a partial year.
• It does not model bonus depreciation or the Section 179 immediate-expensing election, which can let businesses deduct much or all of an asset's cost in year one.
• Salvage value and useful life are estimates; revising them later changes the schedule.
• It covers straight-line and double-declining balance (with the switch to straight-line) only, not sum-of-the-years'-digits or units-of-production.

Sources

• Internal Revenue Service (IRS): Publication 946 (2025), How To Depreciate Property (GDS property classes and recovery periods, half-year, mid-quarter and mid-month conventions, the switch to straight-line, Table A-1, salvage value not used under MACRS, Section 179 limits for 2025 and 2026, and the special depreciation allowance under P.L. 119-21).
• Internal Revenue Service (IRS): About Form 4562, Depreciation and Amortization.