Depreciation Calculator

Depreciation spreads the cost of a long-lived asset across the years it earns its keep, so profit in any single year is not distorted by one big purchase. This calculator builds the full year-by-year schedule under the two most widely used methods — straight line and double declining balance — showing each year's expense, accumulated depreciation, and closing book value.

How It Works

Depreciation exists because of the matching principle: an asset that serves for ten years should charge its cost to all ten years, not just the year of purchase. Three inputs drive every method:

• Asset cost — the full capitalized cost: purchase price plus delivery, installation, and any taxes needed to make the asset ready for use.
• Salvage value — what you expect to recover when the asset is retired. This portion is never depreciated.
• Useful life — the years the asset will be productively used, which for tax purposes is often set by official tables rather than your own estimate.

The difference between cost and salvage — the depreciable base — is what the schedule allocates.

The Two Methods

Straight line divides the base evenly:

$\text{Annual expense} = \frac{\text{Cost} - \text{Salvage}}{\text{Useful life}}$

Double declining balance applies twice the straight-line rate to the opening book value each year, front-loading the expense:

$\text{Expense} = \text{Opening book value} \times \frac{2}{\text{Useful life}}$

This tool's declining-balance implementation never lets book value fall below salvage: when a year's charge would overshoot, it is trimmed to land exactly on salvage, and the final year is forced to close any remaining gap.

| Input | Meaning | | --- | --- | | Asset cost | Capitalized purchase cost of the asset | | Salvage value | Expected residual value at end of life (never depreciated) | | Useful life | Years over which the asset is depreciated | | Method | Straight line or double declining balance |

Worked Example

Equipment costs $10,000**, salvage **$2,000, life 4 years — a depreciable base of $8,000.

Straight line: $8,000 ÷ 4 = **$2,000 every year**; book value steps 8,000 → 6,000 → 4,000 → 2,000.

Double declining balance (rate = 2 ÷ 4 = 50% of opening book value):

| Year | Expense | Accumulated | Book value | | --- | --- | --- | --- | | 1 | $5,000 |$5,000 | $5,000 | | 2 |$2,500 | $7,500 |$2,500 | | 3 | $500 |$8,000 | $2,000 | | 4 |$0 | $8,000 |$2,000 |

Year 3 is the instructive one: 50% of $2,500 would be$1,250, but that would push book value to $1,250 — below the$2,000 salvage floor — so the charge is trimmed to $500 and the asset is fully depreciated a year early. Total depreciation is$8,000 under both methods; only the timing differs.

How to Read the Schedule

• Depreciation expense — the amount charged against income (and usually deducted) in that year.
• Accumulated depreciation — the running total claimed to date; cost minus accumulated equals book value.
• Book value — the asset's carrying amount on the balance sheet, which is an accounting figure, not a market price. A fully depreciated machine can still be worth real money, and a high book value guarantees nothing at resale.

Choosing a Method — and the Tax Caveat

Straight line suits assets that wear evenly (buildings, furniture) and keeps reporting simple. Declining balance suits assets that lose productive value fast (vehicles, computers) and, where tax rules allow the same method, brings deductions forward — valuable because a deduction today beats one in five years. Be aware that tax depreciation often follows its own systems (such as MACRS in the US or the ATO's effective-life tables and pooling rules in Australia), which may mandate rates, conventions like half-year, or immediate write-offs (Section 179, bonus depreciation, instant asset write-off) that no book method replicates. Use this calculator for planning and book schedules, and your jurisdiction's tables for the actual return. Other methods — sum-of-the-years'-digits and units-of-production — exist for assets whose wear tracks output rather than time; this tool covers the two time-based standards.

Limitations

Estimates of salvage and life drive the result; change them and the schedule changes. The calculator does not apply tax-specific conventions, mid-year rules, impairments, or revaluations, and it assumes the asset enters service at the start of year 1.

Frequently Asked Questions

Why is salvage value never depreciated?

Because you expect to get it back. Depreciating below salvage would overstate the asset's consumption; when the asset is eventually sold, any proceeds above book value are recorded as a gain instead.

Which method gives the bigger total deduction?

Neither — both depreciate exactly the depreciable base (cost minus salvage). Declining balance only changes when the deductions land, which still matters for the time value of money and for years when your taxable income is higher.

What if I sell the asset before its life ends?

You stop depreciating at disposal and compare the sale price with the book value at that date: above book value is a gain, below is a loss. The schedule from this calculator gives you the book value for any year in that comparison.