Depreciation Calculator
Work out how an asset loses value with the three standard accounting methods: straight-line, declining balance (including double declining), and sum-of-the-years-digits. Enter the cost, salvage value, and useful life to get the yearly expense, accumulated depreciation, and a full book value schedule. Optionally handle a partial first year.
Formula
Worked example
A 25,000 machine with a 5,000 salvage value over 5 years has a 20,000 depreciable base. Straight-line is 20,000 ÷ 5 = 4,000 per year. Double declining balance starts at 25,000 × (2 ÷ 5) = 10,000 in year 1. Sum-of-years-digits uses a denominator of 5 × 6 ÷ 2 = 15, so year 1 is 20,000 × 5 ÷ 15 = 6,667.
Three ways to depreciate an asset
Depreciation spreads the cost of a long-lived asset across the years it is used. This calculator supports the three standard accounting methods. Straight-line writes off an equal amount every year and is the simplest to apply. Declining balance is an accelerated method that applies a fixed percentage to the falling book value, so the expense is largest in year one and shrinks each year, the factor (commonly 2x, the double declining balance) sets how aggressive that front-loading is. Sum-of-years-digits is also accelerated but uses a weighted fraction based on the remaining life, giving a smoother taper than declining balance. All three start from the same depreciable base, the purchase cost minus the salvage value you expect to recover.
Cost, salvage value, and useful life
Three estimates drive every method. Cost includes the purchase price plus any expense needed to get the asset ready for use, such as shipping and installation. Salvage value is what you reasonably expect the asset to be worth when you dispose of it, and it is never depreciated, so no method drives book value below it. Useful life is how many years the asset will serve the business. Straight-line and sum-of-years-digits subtract the salvage value up front when finding the depreciable base. Declining balance instead applies its rate to the full book value and simply stops once book value reaches the salvage value, which is why its final year is often a smaller balancing figure.
Partial first year and the book value schedule
Assets are rarely bought on the first day of the accounting year, so the calculator offers a partial first year. Tell it how many months the asset was in service and the first year is scaled to that fraction, with the leftover depreciation carried into an extra period at the end. Book value is the asset cost minus the accumulated depreciation booked so far, and the schedule shows it falling year by year until it settles at the salvage value. Accelerated methods reach low book values faster, which can match how an asset actually loses real-world value, while straight-line produces the same predictable drop each year.
Which method should you use
Straight-line is the default for financial reporting because it is simple and stable. Accelerated methods (declining balance and sum-of-years-digits) suit assets that lose most of their value early, such as vehicles and technology, and they can defer tax by front-loading deductions. For U.S. tax filing, the IRS generally requires the Modified Accelerated Cost Recovery System (MACRS) rather than these book methods, so treat the results here as a planning and financial-reporting aid and confirm the tax treatment for your asset class.
Year 1 expense by method, 25,000 cost, 5,000 salvage, 5 years
| Method | Year 1 | Year 2 | Year 3 | Pattern |
|---|---|---|---|---|
| Straight-line | $4,000 | $4,000 | $4,000 | Flat each year |
| Double declining | $10,000 | $6,000 | $3,600 | Steepest front-load |
| Sum-of-years-digits | $6,667 | $5,333 | $4,000 | Smooth taper |
Same asset, three methods. Accelerated methods deduct far more in the first year.
Frequently asked questions
What is the straight-line depreciation formula?
Annual depreciation = (cost minus salvage value) ÷ useful life in years. The numerator is the depreciable base, and dividing by the life spreads it evenly across each year the asset is in service.
How does double declining balance work?
Double declining balance applies a rate of 2 ÷ useful life to the asset book value each year. Because the book value falls every year, so does the expense. It ignores salvage value when applying the rate but stops depreciating once book value reaches the salvage amount. A factor other than 2, such as 1.5x, gives a gentler accelerated curve.
What is the sum-of-years-digits method?
Sum-of-years-digits is an accelerated method. You add up the year numbers (for a 5-year life: 5+4+3+2+1 = 15), then in each year multiply the depreciable base by the remaining life over that total. Year 1 uses 5/15, year 2 uses 4/15, and so on, producing a smooth taper from a large first-year deduction down to a small final one.
How is a partial first year handled?
When an asset is placed in service partway through the year, the first year is scaled to the fraction of the year it was used (months ÷ 12). The depreciation that would have fallen in the unused months is carried into an additional period at the end of the schedule, so the total still equals the depreciable base.
Is this the same method used for taxes?
Not always. Many businesses use straight-line or an accelerated book method for financial reporting but the Modified Accelerated Cost Recovery System (MACRS) for U.S. taxes, which front-loads larger deductions on a fixed schedule. Check the tax rules that apply to your asset class.