Calculation details
Planning estimate only, not financial, tax, or legal advice. Verify assumptions and current rules before making decisions.
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What does this calculator estimate?
A depreciation calculator estimates how much an asset loses value each year using straight-line or declining-balance methods. Enter the cost, salvage value, and useful life to see the annual depreciation and book value.
- Straight line: (cost − salvage) ÷ life
- Declining balance: cost × (2 ÷ life) in year one
- Book value = cost − accumulated depreciation
What depreciation measures
Depreciation spreads an asset's cost over its useful life, matching the expense to the years it generates value. Straight line is even; declining balance front-loads the expense, which is why it's called an accelerated method.
Limitations to watch for
The estimate is simplified: it uses one rate for the whole life and ignores mid-year conventions, partial years, and section 179/MACRS rules that many businesses use for tax. Declining balance here shows the first year only — actual schedules continue on the remaining balance each year.
How to use it in practice
Use straight line for simple book depreciation and declining balance when you want larger deductions early. Keep the useful life realistic — too short overstates the expense, too long understates wear. Confirm which method your accountant or tax rules require.
["Enter the asset's cost and expected salvage value.", 'Enter the useful life in years.', 'Pick straight-line or declining balance; the tool returns the annual or first-year depreciation.']
What depreciation is
Depreciation spreads an asset's cost over its useful life. Straight-line depreciation divides cost minus salvage by the years: a $10,000 asset over 5 years with $1,000 salvage depreciates $1,800 yearly. The calculator models the common methods.
Straight-line vs. accelerated
Straight-line writes off evenly; accelerated methods (double-declining, MACRS) front-load the deduction. Accelerated methods reduce taxable income sooner, which is valuable for cash flow — the calculator shows the annual schedule for both.
Depreciation for taxes
Business assets depreciate on a schedule set by tax rules (MACRS in the US), not the accounting life. Vehicles, equipment, and buildings have different recovery periods. The calculator models the math; the tax code sets the schedule.
A worked example
A $30,000 machine, 7-year life, $3,000 salvage: straight-line = (30,000 − 3,000) ÷ 7 = $3,857 yearly. Double-declining starts at about $8,571 in year one. The calculator compares the annual deductions.
What depreciation is not
Depreciation is an accounting allocation, not a cash outflow — the cash left when the asset was bought. It reduces reported profit and tax, which is why it appears on every business's books.
How this calculator works
Formula
Straight line: annual depreciation = (cost − salvage) ÷ useful life. Declining balance (double): first-year depreciation = cost × (2 ÷ life); the tool reports the first-year amount and ending book value for the selected method.
Worked example
A $50,000 asset with $5,000 salvage value and a 5-year life: straight-line annual depreciation = ($50,000 − $5,000) ÷ 5 = $9,000. Declining balance first year = $50,000 × (2 ÷ 5) = $20,000.
Assumptions to verify
- Salvage value is the estimated resale value at the end of life.
- Straight line spreads the depreciable base evenly.
- Declining balance reports the first-year amount using a double-declining rate.
Frequently asked questions
What is depreciation?
Depreciation is the accounting practice of spreading an asset's cost over its useful life, reflecting that equipment, vehicles, and buildings wear out and lose value over time.
What is the straight-line method?
It deducts an equal amount each year: (cost − salvage value) ÷ useful life. Simple and predictable — the most common method for book accounting.
What is the declining-balance method?
An accelerated method that applies a fixed rate (here double-declining: 2 ÷ life) to the remaining book value, producing larger deductions in early years.
What is salvage value?
The estimated resale value of the asset at the end of its useful life. It caps how much can be depreciated: the depreciable base is cost minus salvage.
Does this match tax depreciation?
Not exactly. Tax depreciation often uses MACRS or section 179 rules with specific class lives and conventions. This calculator is for planning and book estimates, not tax filing.
What is book value?
Book value = original cost − accumulated depreciation. It's what the asset is carried at on the balance sheet, not necessarily its market value.
Which method should I use?
Straight line if you want even expenses; declining balance if you want larger early deductions (common when an asset loses value fastest early on). Check what your tax rules allow.
How do I calculate straight-line depreciation?
(Cost − salvage) ÷ useful life.
What is accelerated depreciation?
Front-loaded deductions like double-declining or MACRS that defer tax.
Does depreciation affect cash?
No — it is an allocation that reduces taxable income, not a cash expense.
What life should I use?
The tax recovery period (MACRS) for taxes; the accounting life for books.
Cite this tool
BoringToolsKit. “Depreciation Calculator.” boringtoolskit.com/depreciation-calculator/ (reviewed 2026-08-25). Free to reference in articles, syllabi, and answer posts with a link.
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