Depreciation Calculator
A depreciation calculator estimates how the book value of an asset — a vehicle, machine, computer, or building — decreases over its useful life. Accountants use depreciation to spread the cost of an asset across the years it generates revenue, matching expense to benefit. This calculator supports the three most common methods: straight-line, declining balance, and sum-of-the-years'-digits, producing a year-by-year schedule that shows the annual depreciation expense, accumulated depreciation, and remaining book value.
Choosing the right method matters. Straight-line spreads the cost evenly and is the simplest for financial reporting. Declining balance is an accelerated method that front-loads depreciation, which better reflects assets like vehicles and electronics that lose value fastest in their first years and can reduce taxable income earlier. Sum-of-the-years'-digits is another accelerated option that falls between the two. Comparing all three side by side helps business owners, accounting students, and finance professionals pick the schedule that fits their asset and reporting needs.
How it works
Straight-line depreciation equals (Cost − Salvage Value) ÷ Useful Life, giving the same expense every year. Declining balance applies a fixed rate to the asset's remaining book value each year: Expense = Book Value × Rate, where the double-declining rate is 2 ÷ Useful Life; the expense shrinks annually and stops at the salvage value. Sum-of-the-years'-digits multiplies the depreciable base (Cost − Salvage) by a fraction whose numerator is the remaining years of life and whose denominator is the sum 1+2+…+n; for a 5-year asset the first-year fraction is 5/15.
Use cases
- Building a depreciation schedule for a company vehicle or machinery for tax records
- Comparing straight-line vs declining balance to decide the best method for a new asset
- Estimating the resale (book) value of equipment after several years of use
- Solving accounting homework that requires sum-of-the-years'-digits schedules
Frequently asked questions
How do you calculate straight-line depreciation?
Subtract the salvage value from the asset's cost and divide by its useful life in years: (Cost − Salvage) ÷ Life. A $12,000 machine with a $2,000 salvage value and 5-year life depreciates $2,000 per year. The expense is identical every year until book value reaches the salvage value.
What is the double declining balance method?
It is an accelerated method that applies twice the straight-line rate to the asset's remaining book value each year. For a 5-year asset the rate is 2 ÷ 5 = 40%, so a $10,000 asset depreciates $4,000 in year one, $2,400 in year two, and so on. Depreciation stops once book value reaches the salvage value.
What is salvage value in depreciation?
Salvage value (or residual value) is the estimated amount an asset will be worth at the end of its useful life — what you could sell it for as used equipment or scrap. It is subtracted from the cost to determine the total depreciable amount, so an asset is never depreciated below its salvage value.
Which depreciation method should I use for a car?
Vehicles typically lose the most value in their first years, so an accelerated method like declining balance mirrors real market behavior more closely than straight-line. For tax purposes, however, the allowed method and rates depend on your country's regulations, so the accounting choice and the fiscal choice may differ.
What is the difference between depreciation and amortization?
Both spread a cost over time, but depreciation applies to tangible assets such as machines, vehicles, and buildings, while amortization applies to intangible assets like patents, software licenses, and trademarks. The calculation logic is similar; amortization almost always uses the straight-line method.