How to use this calculator
- Enter the Asset cost and the Salvage value you expect at the end of its life.
- Set the Useful life in years.
- Choose a Method: straight-line, double declining balance or sum-of-the-years' digits.
- Read First-year depreciation and the table showing depreciation, accumulated depreciation and book value each year.
What depreciation measures
Depreciation allocates the cost of a long-lived asset, such as a vehicle or machine, across the years it is used, instead of treating the whole price as an expense on day one. The depreciable base is the cost minus the salvage value. Book value is the cost minus depreciation taken so far, and it never falls below salvage.
Straight-line: D = (Cost − Salvage) ÷ Life- D = depreciation per year
- Double declining balance: D = Book value × 2 ÷ Life, limited so book value stops at salvage
- Sum-of-the-years' digits: D = (Cost − Salvage) × remaining life ÷ (Life × (Life + 1) ÷ 2)
The useful life is an estimate of how long the asset will serve your business, not necessarily its physical lifespan. A laptop may last eight years but be useful for three.
Example: a $30,000 asset over 5 years
Take an asset costing $30,000 with $5,000 salvage value and a 5-year life. The depreciable base is $25,000.
Straight-line takes $5,000 every year. Double declining balance takes $12,000 in year 1, then $7,200, $4,320 and $1,480, and nothing in year 5 because book value has reached $5,000. Sum-of-the-years' digits gives $8,333 in year 1, falling to $1,667 in year 5. All three total $25,000.
Choosing a method
Straight-line is the simplest and fits assets that give steady value each year. The two accelerated methods front-load the expense, which suits assets that lose value or usefulness faster early on, such as vehicles and computers.
The method changes when you record the expense, not the total. Check which methods your accounting rules or tax authority allow, as tax depreciation often follows its own schedule; in the US, IRS Publication 946 explains it. Your accountant can confirm what applies to you.
A practical rule: pick the method that best matches how the asset really loses value, apply it consistently, and keep the schedule with your records. Switching methods casually makes year-to-year results hard to compare.
Using the schedule
- Compare book value with what the asset could really sell for to judge whether your life estimate is realistic.
- Use first-year depreciation as an annual cost when pricing services or deciding whether to buy.
- Combine it with running costs in the payback period calculator to see when the purchase pays for itself.
- For a leased vehicle, compare with the car lease calculator.
Assumptions and limits
The calculator uses whole years and no mid-year convention. It does not handle partial first years, tax-specific systems such as MACRS, bonus or section 179 deductions, impairments or changes in the estimated life. Salvage value is an estimate and the real figure may differ. Use it for planning and learning, and rely on your accountant for tax filings.
Frequently asked questions
What is salvage value?
It is the amount you expect to get for the asset at the end of its useful life. Depreciation stops when book value reaches it.
What is the difference between straight-line and declining balance?
Straight-line expenses the same amount every year; declining balance expenses more in the early years and less later.
Does the depreciation method change the total expense?
No. All methods write off the same cost minus salvage over the asset's life; only the timing differs.
What is book value?
Book value is cost minus accumulated depreciation. It is an accounting figure and may differ from market value.
Can I use this for tax depreciation?
Use it for estimates only. Tax rules often prescribe their own methods and recovery periods, so check with a tax professional.