Depreciation Calculator

Straight-line (SLN) is the simplest and most widely used depreciation method. It spreads an asset's cost evenly over its useful life: Annual Depreciation = (Cost − Salvage Value) / Useful Life. A $10,500 asset with a $500 salvage value and 5-year life depreciates at $2,000 per year, reducing book value by the same amount each period.

Double-declining balance (DDB) accelerates depreciation by applying twice the straight-line rate to the beginning book value each year. For a 5-year asset, the DDB rate is 2/5 = 40%. This front-loads expense — useful for assets that lose value fastest in their early years (vehicles, technology). Book value can never fall below salvage, so the final year's charge is adjusted to land exactly on salvage.

SYD assigns a declining fraction to each year based on the number of remaining useful years over the sum of all year digits. For a 5-year asset, the sum is 1+2+3+4+5 = 15. Year 1 gets 5/15, year 2 gets 4/15, and so on. Multiplying each fraction by (Cost − Salvage) gives the annual charge. SYD is another accelerated method that produces less expense in later years than DDB.

Units-of-production (UOP) ties depreciation to actual output rather than time. First calculate the per-unit rate: (Cost − Salvage) / Total Estimated Units. Then multiply by actual units produced each period. A machine expected to produce 5,000 units costing $10,500 with $500 salvage depreciates at $2 per unit — a year with 900 units output incurs $1,800 of depreciation.

Book value (or carrying value) is Cost minus Accumulated Depreciation at a point in time. It represents the undepreciated portion of what was paid, not what the asset could be sold for today. Market value fluctuates with supply and demand and may be higher or lower than book value — the two numbers often diverge significantly for real estate, vehicles, and intangible assets.

Salvage value (also residual or scrap value) is the estimated amount an asset will be worth at the end of its useful life. Only the amount above salvage is depreciated — the depreciable base is always Cost minus Salvage. If an asset has no expected resale or scrap value, salvage = $0 and the entire cost is depreciated. The IRS patent example in Publication 946 uses a $5,100 cost with zero salvage.

No. This calculator implements the four textbook accounting methods — straight-line, declining balance, sum-of-years-digits, and units of production. US tax depreciation uses the Modified Accelerated Cost Recovery System (MACRS), which prescribes specific class lives, recovery periods, conventions (half-year, mid-quarter) and allows bonus depreciation and Section 179 expensing. Those statutory rules differ from these formulas. Consult a tax professional for MACRS calculations.

Accelerated methods (DDB or SYD) produce higher depreciation charges in early years, reducing taxable income and deferring tax payments. Between the two, DDB front-loads more aggressively than SYD for most useful lives. However, actual tax savings depend on your applicable tax rate, which method is permitted by local tax law, and whether you have enough taxable income to absorb the deductions.

The declining factor (also called the multiplier) scales the straight-line rate. A factor of 2 gives the standard double-declining balance (DDB) rate of 2/n. A factor of 1.5 gives 150%-declining balance, sometimes used in certain MACRS property classes. You can enter any factor between 1 and 3; a factor of 1 equals the straight-line rate applied to the declining book value (which converges to SLN but never reaches salvage without the final-year clamp).

For declining-balance, the schedule computes each year's charge as Book Value × rate, but caps it at (Book Value − Salvage) whenever the uncapped charge would push book value below salvage. In the final year, the exact remaining amount above salvage is charged so the ending book value equals salvage precisely. This pinned convention is used rather than the optional straight-line switch.

Depreciation applies to tangible fixed assets — machinery, vehicles, buildings. Amortisation applies to intangible assets such as patents, trademarks, or goodwill. Both spread an asset's cost over its useful life using similar formulas (straight-line is the most common for intangibles), but they appear on different lines of the income statement and balance sheet.

This calculator assumes a full-year convention: the asset is placed in service at the start of year 1 and a full year's depreciation is charged in that period. For a partial year — such as an asset purchased mid-year — you would prorate the first year's charge (e.g. 6/12 for a mid-year acquisition). The calculator does not apply half-year, mid-month or mid-quarter conventions automatically.

When an asset is sold or scrapped, the accounting gain or loss is the difference between the sale proceeds and the asset's book value on the date of disposal: Gain (Loss) = Proceeds − Book Value. If you sell a machine with a book value of $3,000 for $4,500, you record a $1,500 gain; selling it for $2,000 produces a $1,000 loss. Gains are generally taxable; losses may be deductible. The depreciation schedule this calculator produces tells you the book value at any point during the asset's life, which is the key input for that disposal calculation.

To qualify for depreciation, an asset must be used in your business or income-producing activity, have a determinable useful life longer than one year, and be expected to last more than one year. Tangible assets such as machinery, vehicles, computers, furniture and commercial buildings typically qualify. Land is never depreciated because it does not wear out or become obsolete. Inventory and personal-use assets do not qualify. In the US, IRS Publication 946 lists asset classes and their assigned recovery periods for MACRS.

No. Depreciation is a non-cash expense — it reduces reported profit on the income statement each period but does not involve an outflow of cash. The cash left the business when the asset was originally purchased. This distinction matters for cash-flow analysis: a company with heavy capital investment may report low net income but generate strong operating cash flow because depreciation is added back when reconciling from net income to cash from operations. It also means accelerated depreciation in early years does not require any extra cash payment.