Depreciation Calculator
Calculate asset depreciation using straight-line, declining balance, or sum-of-years-digits methods.
Year 1 Depreciation
—
Book Value After Year 1
—
Accumulated (Half Life)
—
What is Depreciation Calculator?
A depreciation calculator determines how much value an asset loses over time using different accounting methods. Straight-line depreciation spreads cost evenly over the asset's life. Declining balance front-loads depreciation. Sum-of-years-digits is an accelerated method between the two. Businesses use depreciation to match expenses with the revenue assets generate.
How to use
- 1 Enter the asset's original cost.
- 2 Enter the salvage value (estimated worth at end of useful life).
- 3 Enter the useful life in years.
- 4 Select a depreciation method.
- 5 Review annual depreciation, first-year book value, and accumulated depreciation at the midpoint.
Formula
Example calculation
Asset cost $10,000, salvage $1,000, 5-year life. Straight-line: $1,800/year. Declining balance year 1: $4,000. SYD year 1: $3,000.
Frequently asked questions
What is salvage value?
Salvage value (also called residual value) is the estimated amount you could sell the asset for at the end of its useful life. It reduces the total depreciable amount. If you expect to dispose of the asset with no value, salvage is $0.
Which method should I use?
Straight-line is simplest and most common for financial reporting. Declining balance (double declining) is preferred for assets that lose value quickly early on (vehicles, computers). SYD is a middle-ground accelerated method.
What is MACRS?
Modified Accelerated Cost Recovery System is the IRS-required depreciation method for US tax purposes. It uses specific recovery periods and conventions not covered here. Consult IRS Publication 946 or a tax advisor for tax depreciation.
Does depreciation affect cash flow?
Depreciation is a non-cash expense — it reduces taxable income without requiring a cash outlay in the current period. This creates a tax shield that improves actual cash flow relative to reported income.
What is book value?
Book value is the asset's recorded value on the balance sheet — original cost minus accumulated depreciation. It does not necessarily reflect market value, which depends on supply, demand, and condition.