How to use the depreciation calculator
- Enter the asset cost: the price plus delivery, installation and anything else needed to get it working.
- Enter the salvage value, what you expect to sell it for at the end. Leave it blank for zero.
- Enter the useful life in whole years.
- Choose a method. For declining balance, set the rate factor (2 for double declining, 1.5 for 150%) and choose whether to switch to straight-line.
- If you started using the asset partway through the year, enter the months in service in the first year.
- Read the first-year figure, then the chart and the full schedule.
The depreciation formulas
Straight-line spreads the depreciable amount evenly. Declining balance applies a fixed rate to the shrinking book value, so it front-loads the expense. It never takes book value below salvage, and with the switch turned on it moves to straight-line once that gives the bigger figure, which uses up the full amount by the last year. Sum-of-the-years' digits is also front-loaded: for a 5-year life the digits add to 15, so year 1 takes 5/15, year 2 takes 4/15, and so on.
With a partial first year, each 12-month year of the asset's life is split across two fiscal years in proportion to the months, and the schedule gains one extra year.
Worked example
The defaults are a $10,000 machine with a $1,000 salvage value and a 5-year life, using straight-line and a full first year:
- Depreciable amount: $10,000 − $1,000 = $9,000
- Yearly depreciation: $9,000 ÷ 5 = $1,800.00, or 20% of the depreciable amount
- Book value falls to $8,200, $6,400, $4,600, $2,800 and finally $1,000, the salvage value
With double declining balance the rate is 2 ÷ 5 = 40% of book value, so year 1 is $10,000 × 0.40 = $4,000.00. With sum-of-the-years' digits, year 1 is $9,000 × 5/15 = $3,000.00. If the machine went into service with only 6 months left in the year, double declining gives $4,000 × 6/12 = $2,000.00 for year 1.
Comparing the methods
The same $10,000 asset, $1,000 salvage, 5 years:
| Year | Straight-line | 150% declining | Double declining | Sum-of-years' digits |
|---|---|---|---|---|
| 1 | $1,800 | $3,000 | $4,000 | $3,000 |
| 2 | $1,800 | $2,100 | $2,400 | $2,400 |
| 3 | $1,800 | $1,470 | $1,440 | $1,800 |
| 4 | $1,800 | $1,215 | $864 | $1,200 |
| 5 | $1,800 | $1,215 | $296 | $600 |
| Total | $9,000 | $9,000 | $9,000 | $9,000 |
Every method writes off the same $9,000 in the end; only the timing differs. The 150% column switches to straight-line in year 4, when $2,430 left over 2 years ($1,215 a year) beats 30% of book value ($1,029). The double declining column is capped in year 5 at $296 so book value doesn't drop below the $1,000 salvage value.
Book depreciation vs. tax depreciation
This calculator shows book depreciation, the kind used in financial statements. Tax depreciation follows separate rules. In the US, most business property placed in service after 1986 is depreciated under MACRS, which sets recovery periods by property class, uses half-year, mid-quarter or mid-month conventions, and publishes percentage tables. Section 179 expensing and bonus depreciation can also apply. These aren't modeled here, so for a tax return use IRS Publication 946 or a tax professional.
Frequently asked questions
Which depreciation method should I use?
Straight-line suits assets that wear out evenly, like furniture or buildings, and it is the simplest to explain. Declining balance and sum-of-the-years' digits suit assets that lose value quickly at first, like vehicles and computers. Once you pick a method for an asset, accounting standards expect you to apply it consistently and change only for a good reason.
What is double declining balance?
It is declining balance with a rate factor of 2, so the yearly rate is twice the straight-line rate. For a 5-year life, straight-line is 20% a year and double declining is 40% of the remaining book value. The deductions fall each year, which is why most schedules switch to straight-line near the end.
Does salvage value affect declining balance?
Not the yearly rate. Declining balance applies its rate to the full book value and ignores salvage until the end, when it stops depreciation at the salvage value. The other two methods subtract salvage first and depreciate only the difference.
Can land be depreciated?
No. Land doesn't wear out or get used up, so it has no useful life. When you buy a building, split the price between the land and the building and depreciate only the building.
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Results are estimates for educational purposes and are not financial, tax or legal advice. See our disclaimer.