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Depreciation calculator

Enter cost, salvage value and useful life and choose a method: see each year’s depreciation, book value and a comparison of straight-line, declining balance, sum-of-the-years’ digits and units of production.

Educational simulation. Not investment advice. Results are estimates based on the data you enter and do not replace advice from a qualified professional.

Reviewed on Oct 31, 2026

Annual figures, with no half-year convention in the first year. Book depreciation uses the company’s estimated life; the tax rate is only for comparison.

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—First-year depreciation
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Book value under each method

Cost minus accumulated depreciation at the end of each year. All end at the salvage value.

Tap the chart to see the values.

Year-by-year schedule

Chosen method: depreciation for the year, accumulated and book value at year end.

Methods compared

Depreciation for each year under each method. The total is always the same: cost minus salvage value.

Next step

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The summary lists your inputs, results, formulas, assumptions and sources. The full report also includes the charts and interpretations, in color. In the print dialog, choose Save as PDF.

Method, assumptions and sources

Formulas

Straight-line: (cost − salvage) ÷ useful life
Declining balance: max(book value × factor ÷ life; (book value − salvage) ÷ years left), capped at book value − salvage
Sum-of-the-years’ digits: (cost − salvage) × (life − year + 1) ÷ [life × (life + 1) ÷ 2]
Units of production: (cost − salvage) × year’s output ÷ total output
Book value = cost − accumulated depreciation; tax rate reference: cost × annual rate

Assumptions and limits

  • Full years, with no partial-year or mid-month convention; useful life and salvage stay constant.
  • In units of production, each line is a year; depreciation stops once the depreciable base is used up.
  • The tax rate is only a typed reference applied to full cost; MACRS conventions, Section 179 and bonus depreciation are not modeled.

Official sources and references

Frequently asked questions

What is depreciation?

It is the loss in an asset’s value from use and time, recorded as an expense over its useful life. A $50,000 machine expected to last 5 years and be worth $5,000 at the end creates $45,000 of depreciation, spread across the years according to the method.

How do I read the result of the page’s example?

In the example, the asset costs $50,000, has a $5,000 salvage value and a 5-year life. Straight-line depreciation is $9,000 a year ($750 a month), and book value drops to $41,000 at the end of year 1. Double declining balance would book $20,000 in year 1 instead.

Which method should I use?

Straight-line is the default for most financial statements. Declining balance and sum-of-the-years’ digits front-load the expense and suit assets that lose value quickly; units of production follows use. For U.S. taxes, most assets follow MACRS rather than these book methods.

Where do I find useful lives?

For your books, estimate useful life from experience, the manufacturer and how you use the asset. For U.S. taxes, IRS Publication 946 lists MACRS recovery periods by asset class, such as 5 years for cars and computers and 7 years for most office furniture and equipment.

Does depreciation reduce taxes?

Yes, tax depreciation is deductible, which lowers taxable income. The tax schedule (MACRS, Section 179, bonus depreciation) often differs from book depreciation, and the difference is tracked separately.

Is book value what the asset would sell for?

No. It is cost minus accumulated depreciation. The market price may be higher or lower; selling above book value creates a gain, which may be taxable and, for tax purposes, may include depreciation recapture.

When should I talk to an accountant?

To set useful lives and salvage values, pick tax methods and elections, handle used assets and improvements, or test for impairment. This calculator shows the math of the methods; the accounting and tax treatment should be confirmed by a professional.

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Depreciation: straight-line, declining balance, sum-of-the-years’ digits and units of production

Machines, vehicles, computers and furniture lose value with use and time. Depreciation records that loss as an expense over the asset’s useful life instead of expensing the whole cost in the year of purchase. It is not a cash outflow, but it reduces book profit and, under tax rules, taxable income.

The four methods

MethodHow it worksYear 1 ($50,000 cost, $5,000 salvage, 5 years)
Straight-line(cost − salvage) ÷ useful life$9,000
Double declining balance40% of book value, switching to straight-line when larger$20,000
Sum-of-the-years’ digits(cost − salvage) × 5/15, then 4/15…$15,000
Units of production(cost − salvage) × year’s output ÷ total output$13,500 (30,000 of 100,000 units)

All of them depreciate the same total, $45,000; only the timing changes.

Book vs tax depreciation

For financial statements (U.S. GAAP or IFRS, IAS 16), the business estimates each asset’s useful life and salvage value. For U.S. federal taxes, most business property follows MACRS, with set recovery periods, conventions and methods, plus options such as Section 179 expensing and bonus depreciation. IRS Publication 946 explains the rules.

When to use each method

Straight-line is the most common and the simplest. Accelerated methods suit assets that lose efficiency quickly, such as technology. Units of production fits equipment whose wear depends on use, such as machines by hours run or trucks by miles driven.

Be careful

Land is not depreciated. Tax depreciation choices affect several years of returns; check with a tax professional before deciding.