Declining balance is the family of accelerated depreciation methods that apply a fixed percentage to an asset’s shrinking book value. The bigger the factor, the faster the write-off: 200% (double declining) is the most aggressive common choice, 150% is a moderate one, and 125% or 175% appear in some industries and older tax rules. This calculator handles any factor, or a rate you enter directly, and lets you decide whether to switch to straight-line once it pays more.
How to use the declining balance calculator
- Enter the asset cost, salvage value and useful life.
- Choose the declining-balance factor — 125%, 150%, 175%, 200% — or pick Enter a rate to type an annual percentage of book value, such as 20% or 25%.
- Choose the months in service in the first year.
- Tick switch to straight-line to move to even depreciation once it gives a larger amount.
Declining balance formulas
With the switch turned on, each year the calculator also computes straight-line over the remaining life — (book value − salvage) ÷ remaining years — and uses it from the first year it is larger. Depreciation is always capped so book value never falls below salvage.
Worked example
A commercial oven costs $75,000, has a $7,500 salvage value and an 8-year life. At 150%, the rate is 1.5 ÷ 8 = 18.75%.
| Year | Beginning book value | Method | Depreciation | Ending book value |
|---|---|---|---|---|
| 1 | $75,000.00 | 18.75% | $14,062.50 | $60,937.50 |
| 2 | $60,937.50 | 18.75% | $11,425.78 | $49,511.72 |
| 3 | $49,511.72 | 18.75% | $9,283.45 | $40,228.27 |
| 4 | $40,228.27 | 18.75% | $7,542.80 | $32,685.47 |
| 5–8 | $32,685.47 | Straight-line | $6,296.37 a year | $7,500.00 |
In year 5, declining balance would give $32,685.47 × 18.75% = $6,128.53, but spreading the remaining $25,185.47 over four years gives $6,296.37, so the schedule switches. Without the switch, years 5–7 keep shrinking and year 8 has to absorb a $10,031.73 catch-up.
How the factor changes the schedule
Same oven, switch enabled:
| Factor | Rate on book value | Year 1 depreciation | Switches to straight-line |
|---|---|---|---|
| 125% | 15.625% | $11,718.75 | Year 4 |
| 150% | 18.75% | $14,062.50 | Year 5 |
| 175% | 21.875% | $16,406.25 | Year 6 |
| 200% | 25% | $18,750.00 | Year 8 |
The higher the factor, the more cost is pulled into the early years and the later the switch occurs.
Entering a rate directly
Some accounting systems and many countries outside the US specify a reducing-balance rate rather than a factor — for example, 25% a year for vehicles. Choose Enter a rate and type it in; the calculator applies it to book value each year. A 25% rate on an 8-year life is equivalent to a 200% factor.
Related methods
- Double declining balance — the 200% case, shown next to straight-line.
- Fixed declining balance — a rate derived from cost and salvage so book value lands near salvage without a switch.
- Variable declining balance — the spreadsheet VDB approach, with depreciation between any two periods.
Schedules are estimates for planning and bookkeeping, not accounting or tax advice. Tax depreciation should follow IRS rules and tables.
Frequently asked questions
How does declining balance depreciation work?
Each year you apply a fixed percentage to the asset's current book value rather than its original cost. Because the book value keeps shrinking, so does each year's depreciation. The percentage is the straight-line rate times a factor, such as 1.5 for 150% declining balance.
What does 150% declining balance mean?
The yearly rate is 150% of the straight-line rate. For an 8-year life, straight-line is 12.5% a year, so 150% declining balance applies 18.75% to the book value each year.
Why switch to straight-line?
Declining balance never reaches salvage value on its own. At some point, spreading the remaining depreciable amount evenly over the remaining life gives a bigger deduction than the declining rate. Switching at that point is standard practice and is built into the IRS MACRS tables.
What happens without the switch?
The calculator applies the declining rate every year and then, in the final year, depreciates whatever remains above salvage value. For the oven example on this page, that leaves a large $10,031.73 catch-up in year 8.
Is declining balance used for taxes?
Yes. Under MACRS, 3-, 5-, 7- and 10-year property generally uses 200% declining balance and 15- and 20-year property uses 150%, each switching to straight-line, according to IRS Publication 946.