Depreciation Calculator
Calculate asset depreciation using Straight-Line, Declining Balance, Double Declining Balance, or Sum-of-Years' Digits methods. View the complete yearly depreciation schedule. See also Break Even Calculator and ROI Calculator.
How to Calculate Depreciation
Depreciation allocates the cost of a tangible asset over its useful life. The depreciable amount is the asset cost minus its salvage value (estimated value at end of life). Different methods spread this cost differently: straight-line distributes it evenly, while accelerated methods (declining balance, double declining, sum-of-years' digits) front-load more depreciation in earlier years. The choice of method affects financial statements and tax deductions.
Depreciation Formulas
Straight-Line:
Annual Dep = (Cost − Salvage) / Useful Life
Declining Balance:
Annual Dep = Book Value × (1 / Useful Life)
Double Declining Balance:
Annual Dep = Book Value × (2 / Useful Life)
Sum-of-Years' Digits:
Annual Dep = (Cost − Salvage) × (Remaining Life / Sum of Years)
Sum of Years = n(n+1)/2
Example Calculation
Asset Cost: $50,000 | Salvage: $5,000 | Life: 5 years
Straight-Line:
Annual Dep = ($50,000 − $5,000) / 5 = $9,000/year
Double Declining Balance (Year 1):
Dep = $50,000 × (2/5) = $20,000
Sum-of-Years (Year 1):
Sum = 5(6)/2 = 15
Dep = $45,000 × (5/15) = $15,000
Method Comparison Table ($50,000 asset, $5,000 salvage, 5 years)
| Year | Straight-Line | Declining Bal. | Double Decl. | Sum-of-Years |
|---|---|---|---|---|
| 1 | $9,000 | $10,000 | $20,000 | $15,000 |
| 2 | $9,000 | $8,000 | $12,000 | $12,000 |
| 3 | $9,000 | $6,400 | $7,200 | $9,000 |
| 4 | $9,000 | $5,120 | $800 | $6,000 |
| 5 | $9,000 | $4,096 | $0 | $3,000 |
Frequently Asked Questions
Which depreciation method should I use?
Straight-line is simplest and most common for financial reporting. Accelerated methods (double declining, sum-of-years) are better for tax purposes as they provide larger deductions in early years. The IRS allows MACRS (Modified Accelerated Cost Recovery System) for tax depreciation in the US.
What is salvage value?
Salvage value (or residual value) is the estimated amount the asset will be worth at the end of its useful life. It could be the scrap value, trade-in value, or resale value. Some assets have zero salvage value if they're expected to be worthless at end of life.
Can land be depreciated?
No. Land is not depreciated because it has an unlimited useful life and generally does not lose value. However, land improvements (fencing, paving, landscaping) can be depreciated. Buildings on land are depreciated separately from the land itself.
What is the difference between depreciation and amortization?
Depreciation applies to tangible assets (equipment, vehicles, buildings). Amortization applies to intangible assets (patents, copyrights, goodwill). Both spread the cost over the asset's useful life, but they apply to different types of assets.