Depreciation turns a large purchase into a series of annual expenses that match the years the asset is used. The total is fixed — what you paid minus what you expect to recover at the end — but the timing depends on the method. This calculator builds a complete schedule for the method you choose, handles assets placed in service partway through the year, and lines up four common methods side by side so you can see how differently they spread the same cost.
How to use the depreciation calculator
- Enter the asset cost, including shipping, installation and anything else needed to get it working.
- Enter the expected salvage value at the end of its life.
- Enter the useful life in years.
- Choose a method: straight-line, double declining balance, 150% declining balance or sum-of-the-years’ digits.
- Choose the months in service during the first fiscal year (12 for a full year).
- For declining-balance methods, decide whether to switch to straight-line once it gives a larger deduction.
The four methods at a glance
| Method | Annual depreciation | Pattern |
|---|---|---|
| Straight-line | (Cost − Salvage) ÷ Life | Equal every year |
| Double declining balance | Book value × 2 ÷ Life | Largest first, falling each year |
| 150% declining balance | Book value × 1.5 ÷ Life | Front-loaded, gentler than double |
| Sum-of-the-years’ digits | (Cost − Salvage) × Remaining life ÷ SYD | Falls by the same amount each year |
Declining-balance methods ignore salvage value when applying the rate but never let book value drop below it.
Worked example
A business buys equipment for $40,000, expects to sell it for $4,000 after 5 years, and uses it for the full first year. The depreciable base is $36,000.
| Year | Straight-line | Double declining | 150% declining | Sum of the years’ digits |
|---|---|---|---|---|
| 1 | $7,200 | $16,000 | $12,000 | $12,000 |
| 2 | $7,200 | $9,600 | $8,400 | $9,600 |
| 3 | $7,200 | $5,760 | $5,880 | $7,200 |
| 4 | $7,200 | $3,456 | $4,860 | $4,800 |
| 5 | $7,200 | $1,184 | $4,860 | $2,400 |
| Total | $36,000 | $36,000 | $36,000 | $36,000 |
Double declining balance writes off 44% of the depreciable base in year 1 alone; straight-line writes off 20%. The 150% method switches to straight-line in year 4, when spreading the remaining $9,720 over two years ($4,860 a year) beats 30% of the $13,720 book value.
Choosing a method
- Match how the asset is consumed. Buildings and furniture deliver similar service every year; delivery trucks and laptops are most productive, and lose the most market value, when new.
- Consider repairs. Accelerated methods pair large early depreciation with low early repair costs, smoothing the total cost of ownership.
- Usage-driven assets may be better served by the units-of-production method.
- Consistency matters. Under US GAAP, a company should apply its chosen method consistently and disclose it; changing methods is treated as a change in accounting estimate.
Book depreciation vs. tax depreciation
Financial statements use the methods above, with useful lives and salvage values estimated by management. The IRS has its own system: the Modified Accelerated Cost Recovery System (MACRS) assigns recovery periods by asset class, ignores salvage value and uses set conventions, as described in IRS Publication 946. Many businesses therefore keep two schedules. For residential and commercial buildings, see the rental property depreciation calculator.
Each method also has its own detailed page: straight-line, double declining balance, declining balance with any factor and sum-of-the-years’ digits.
Schedules are estimates for planning and bookkeeping practice, not accounting or tax advice. Consult a CPA for financial reporting or tax filings.
Frequently asked questions
What is depreciation?
Depreciation spreads the cost of a long-lived asset — a machine, vehicle, computer or building — over the years it helps produce revenue, instead of expensing it all when bought. Each year's charge reduces the asset's book value until it reaches its estimated salvage value.
Which depreciation method should I use?
Straight-line suits assets that wear evenly and is the most common for financial statements. Accelerated methods such as double declining balance or sum-of-the-years' digits fit assets that lose value or usefulness fastest when new, like vehicles and technology.
Do all methods depreciate the same total amount?
Yes. Every method depreciates cost minus salvage value in total; they differ only in timing. In the example on this page each method writes off exactly $36,000 over five years.
How do I handle an asset bought partway through the year?
Enter the number of months it was in service in the first fiscal year. The first year's charge is prorated, and the schedule runs one extra year to pick up the remaining months.
Is this the same as tax depreciation?
No. These are book methods for financial reporting. For US federal taxes, most business property is depreciated under MACRS using IRS recovery periods and conventions, and Section 179 or bonus depreciation may allow faster write-offs.