Depreciation Calculator

A depreciation calculator works out how much of an asset's value is used up each year over its useful life. It is used by business owners planning capital purchases, by accountants preparing statements, and by students learning the three standard depreciation methods. The calculator covers straight-line depreciation, double-declining balance depreciation, and sum-of-years-digits depreciation, showing the annual charge and the remaining book value for every year.

Depreciation spreads the cost of a long-lived asset, such as a vehicle, machine, or building, across the years it is used. Each method spreads the cost differently: straight-line charges the same amount every year, while the two accelerated methods charge more in the early years and less later. The calculator reports the full schedule so you can see the difference at a glance.

How to Use the Depreciation Calculator

1. Enter the asset's cost, the price paid to acquire it.
2. Enter the salvage value, the amount you expect the asset to be worth at the end of its life. Enter 0 if there is none.
3. Enter the useful life in years.
4. Choose a depreciation method from the dropdown.
5. Read the first-year depreciation, the total depreciable amount, and the year-by-year schedule.

The calculator performs the arithmetic only. It does not determine which method is required for tax or financial reporting in any jurisdiction.

The Formulas

Straight-line depreciation charges an equal amount each year:

• Annual depreciation = (cost − salvage value) ÷ useful life

Double-declining balance applies a rate of 2 ÷ useful life to the remaining book value each year, and never depreciates below salvage value:

• Depreciation in a year = book value at start of year × (2 ÷ useful life)

Sum-of-years-digits applies a declining fraction. First add the years: for a life of n years, the sum S = n × (n + 1) ÷ 2. Then:

• Depreciation in year y = (cost − salvage value) × (n − y + 1) ÷ S

In every method, book value starts at cost and falls by the depreciation charged each year.

Worked Examples

Example 1, Straight-line. A machine costs $10,000, has a salvage value of $1,000, and a useful life of 5 years.

1. Depreciable amount: $10,000 − $1,000 = $9,000.
2. Annual depreciation: $9,000 ÷ 5 = $1,800.
3. Book values: $8,200, $6,400, $4,600, $2,800, and $1,000 after years 1 through 5.

Example 2, Double-declining balance. The same machine, depreciated at 2 ÷ 5 = 40% per year.

1. Year 1: $10,000 × 40% = $4,000; book value $6,000.
2. Year 2: $6,000 × 40% = $2,400; book value $3,600.
3. Year 3: $3,600 × 40% = $1,440; book value $2,160.
4. Year 4: $2,160 × 40% = $864; book value $1,296.
5. Year 5: charge only $296 so the book value lands exactly on $1,000.

Example 3, Sum-of-years-digits. A $5,000 asset with no salvage value and a 4-year life.

1. Sum of years: 4 + 3 + 2 + 1 = 10.
2. Year 1: $5,000 × 4 ÷ 10 = $2,000.
3. Year 2: $5,000 × 3 ÷ 10 = $1,500.
4. Year 3: $5,000 × 2 ÷ 10 = $1,000.
5. Year 4: $5,000 × 1 ÷ 10 = $500.

Comparing the Methods

Accelerated methods produce larger expenses early, which reduces reported profit in the first years and increases it later, relative to straight-line.

Choosing a Depreciation Method

Straight-line is the default for most situations because it is simple and spreads the cost evenly. Accelerated methods are used when an asset loses value fastest in its early years, which is true of vehicles, computers, and most equipment. By charging more early, accelerated depreciation better matches an asset's actual decline in market value and, in some reporting frameworks, reduces taxable income in the early years while increasing it later. The choice of method is a reporting decision; this calculator gives you all three so you can compare them on the same inputs.

The three methods always depreciate the same total amount over the asset's life: cost minus salvage value. The only difference is timing. Over the full life, straight-line, double-declining, and sum-of-years-digits all reduce the book value from the cost down to the salvage value. What changes is how much of that total lands in year one versus year five.

Estimating Salvage Value

Salvage value is an estimate, not a measurement, and it is often the most uncertain input in the whole calculation. It is the amount you expect to recover by selling or scrapping the asset at the end of its useful life. Many organisations simply set it to zero for simplicity, which means the entire cost is depreciated. If you expect to resell the asset, use a realistic resale value; overstating salvage value understates annual depreciation, and understating it overstates the charge. When in doubt, use a conservative, lower salvage value.

Book Value Explained

Book value is the asset's cost minus the depreciation accumulated so far. It is an accounting number, not a market value, and it does not necessarily reflect what the asset could be sold for today. Each year, the depreciation charge reduces the book value until it reaches the salvage value at the end of the useful life. The calculator shows the book value after each year so you can see the asset's carrying value on the books at any point in its life.

Partial-Year and Other Considerations

The calculator assumes a full year of depreciation each year, which is standard for planning and learning. In practice, an asset bought partway through a year is often depreciated proportionally in its first year, a convention called partial-year depreciation. Different frameworks also handle the switch from double-declining balance to straight-line at different points to ensure the asset reaches salvage exactly. These refinements are outside the scope of the three core formulas, which remain the foundation every method builds on.

Worked Example with a Vehicle

A delivery van costs $25,000, has a $5,000 salvage value, and a 5-year life.

1. Depreciable amount: $25,000 − $5,000 = $20,000.
2. Straight-line annual depreciation: $20,000 ÷ 5 = $4,000.
3. Double-declining rate: 2 ÷ 5 = 40%; year 1: $25,000 × 40% = $10,000.
4. The van loses value fastest in year one under the accelerated method, then the charge falls each year.

Frequently Asked Questions

What is the difference between straight-line and accelerated depreciation?

Straight-line charges the same amount every year. Accelerated methods, such as double-declining balance and sum-of-years-digits, charge more in the early years and less later. The total depreciation is the same; only the timing differs.

What is salvage value?

Salvage value, sometimes called residual value, is the amount you expect the asset to be worth at the end of its useful life. It is subtracted from the cost to find the depreciable amount.

How do I calculate straight-line depreciation?

Subtract the salvage value from the cost, then divide by the useful life in years. A $10,000 asset with a $1,000 salvage value over 5 years depreciates $1,800 per year.

Why does double-declining balance stop early?

Double-declining balance is a fixed percentage of the remaining book value, so it never quite reaches zero. The schedule stops depreciating once book value hits the salvage value, charging only the remaining amount in the final year.

Is depreciation the same as tax depreciation?

No. These are the standard accounting methods. Tax depreciation rules, such as which method is allowed and over what period, are set by tax authorities and vary by jurisdiction. This calculator does not apply tax rules.

Can I use this calculator for real financial statements?

Yes, for the arithmetic. The three methods follow standard accounting formulas. Confirm which method your reporting framework requires and that your useful-life and salvage-value assumptions are appropriate before relying on the output.

What happens if I enter a salvage value higher than the cost?

The calculator will not produce a result, because salvage value cannot exceed the asset's cost. A negative depreciable amount has no meaning in the standard formulas.

Do all three methods depreciate the same total?

Yes. Straight-line, double-declining, and sum-of-years-digits all depreciate exactly cost minus salvage value over the useful life. They differ only in how much is charged in each year.

Related Tools

• Break-Even Calculator, find the sales level where revenue covers costs.
• Loan Calculator, plan financing for an asset purchase.
• Compound Interest Calculator, see how money grows over time.

Sources

The straight-line, double-declining balance, and sum-of-years-digits methods are standard depreciation methods described in introductory accounting textbooks and in the IFRS and US GAAP frameworks. The formulas here are the textbook definitions and do not encode any jurisdiction-specific tax schedule.