Depreciation Calculator
Calculate how an asset loses value over time. Straight-line, declining balance, or compare both methods side by side with a full year-by-year schedule.
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How to Use This Calculator
Tab "Straight-Line"
Enter the asset cost, salvage value, and useful life in years. The calculator shows the annual depreciation amount and a year-by-year schedule with book values. Straight-line gives you the same expense every year.
Tab "Declining Balance"
Enter the same asset details plus a decline rate multiplier. Set 2 for double-declining balance (DDB) or 1.5 for 150% declining balance. The schedule shows how depreciation is front-loaded into early years, with decreasing amounts as book value drops. Depreciation stops once book value reaches salvage.
Tab "Compare Methods"
Enter one set of asset details and see straight-line and declining balance side by side in a single table. Compare book values at any year to see which method depreciates faster and by how much.
The Formulas
Annual Depreciation = (Cost − Salvage Value) / Useful Life
Book Value at Year N = Cost − (Annual Depreciation × N)
Declining balance depreciation:
Rate = Multiplier / Useful Life
Year N Depreciation = Book Value at Start of Year × Rate
Depreciation stops when Book Value reaches Salvage Value
Double-declining balance (DDB):
Uses Multiplier = 2, so Rate = 2 / Useful Life
For a 10-year asset, the annual rate is 20% of current book value
Book value:
Book Value = Asset Cost − Accumulated Depreciation
All calculations use standard accounting mathematics. No country-specific tax depreciation rules (MACRS, capital allowances, AfA) are applied.
Worked Examples
Example 1 — Straight-line: $50,000 asset, $5,000 salvage, 10 years
A business purchases equipment for $50,000 with an expected salvage value of $5,000 after 10 years of use.
Calculation: ($50,000 − $5,000) / 10 = $4,500 per year. After 5 years, accumulated depreciation is $22,500, leaving a book value of $27,500.
Example 2 — Double-declining balance: same asset
The same $50,000 asset using DDB (multiplier = 2). The annual rate is 2/10 = 20% of the current book value.
DDB front-loads the expense: $10,000 in year 1 versus $4,500 with straight-line. By year 5, the DDB book value ($16,384) is much lower than straight-line ($27,500). In later years, DDB depreciation shrinks and eventually stops at the salvage value.
Example 3 — Comparison: SL vs DDB at year 5
Side-by-side comparison for the $50,000 asset with $5,000 salvage over 10 years.
| Metric | Straight-Line | DDB |
|---|---|---|
| Year 1 depreciation | $4,500 | $10,000 |
| Year 5 depreciation | $4,500 | $4,096 |
| Book value at year 5 | $27,500 | $16,384 |
| Accumulated dep at year 5 | $22,500 | $33,616 |
| Total depreciation (all years) | $45,000 | $45,000 |
Both methods depreciate the same total amount ($45,000) over the asset life. The difference is timing: DDB recognizes 75% of total depreciation in the first 5 years, while straight-line recognizes exactly 50%. This matters for tax planning and cash flow in early years.
Understanding Depreciation: Key Concepts
Why Depreciation Matters
Depreciation matches the cost of a long-lived asset to the revenue it generates over time. Instead of recording the entire cost in the year of purchase, the expense is spread across the useful life. This gives a more accurate picture of profitability and is required by accounting standards (GAAP, IFRS). For tax purposes, depreciation reduces taxable income.
Straight-Line vs Accelerated Methods
Straight-line is the simplest method: equal depreciation every year. It works well for assets that provide consistent value over time, such as buildings or office furniture. Accelerated methods like declining balance recognize more depreciation in early years. This reflects reality for assets like vehicles and technology that lose value faster when new.
Salvage Value
Salvage value (residual value) is what the asset is expected to be worth at the end of its useful life. Some assets have zero salvage value (fully consumed). Others retain meaningful value (a vehicle sold after 5 years, equipment with scrap metal value). Depreciation only applies to the difference between cost and salvage.
Book Depreciation vs Tax Depreciation
Companies often use different depreciation methods for financial reporting (book) and tax returns. Book depreciation follows accounting standards; tax depreciation follows local tax law. In the US, the IRS prescribes MACRS schedules. In the UK, capital allowances apply. In Germany, AfA tables set standard useful lives. This calculator provides book depreciation using standard formulas, not tax-specific schedules.
Frequently Asked Questions
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For country-specific depreciation and tax calculators that account for local rules: