Depreciation Calculator

Calculate how your asset's value decreases over time. Supports straight-line, declining balance, and sum-of-years-digits depreciation methods.

Asset Cost

Salvage Value

Useful Life (Years)

Depreciation Method

Results

Enter values and click Calculate to see results

How to Use This Depreciation Calculator

Enter the asset cost

Input the original purchase price of the asset. This is what you paid to acquire it.

Set salvage value and useful life

Salvage value is what the asset will be worth at the end of its useful life. Useful life is how many years you expect to use it.

Choose a depreciation method and calculate

Select straight-line, declining balance, or sum-of-years-digits. Click Calculate to see the annual depreciation schedule.

Depreciation Methods Compared

Method	How It Works	Best For
Straight-Line	Equal depreciation each year	Buildings, furniture, general office equipment
Declining Balance	Higher depreciation in early years	Vehicles, computers, technology that becomes obsolete quickly
Sum-of-Years-Digits	Accelerated but less extreme than declining balance	Assets that lose value quickly but not as fast as tech

Understanding Depreciation

Depreciation is how businesses spread the cost of an asset over its useful life. Instead of deducting the full cost in year one, you deduct a portion each year. This matches the expense to the revenue the asset helps generate.

Why Depreciation Matters

Depreciation affects your taxable income and book value. Higher depreciation means lower taxable income in the short term. It also shows how much of an asset's value has been "used up" on your balance sheet.

Salvage Value Explained

Salvage value (also called residual value or scrap value) is what you expect to get when you sell or dispose of the asset at the end of its useful life. A car might have a salvage value based on its expected trade-in value. A computer might have zero salvage value.

Useful Life Guidelines

The IRS publishes useful life guidelines in Publication 946. Common examples: computers and office equipment (5 years), vehicles (5 years), furniture and fixtures (7 years), residential rental property (27.5 years), commercial property (39 years). Your actual useful life may differ based on how you use the asset.

Common Useful Life Estimates

Asset Type	Typical Useful Life	Common Method
Computers & Software	3-5 years	Declining Balance
Office Furniture	7-10 years	Straight-Line
Vehicles	5-8 years	Declining Balance
Machinery	10-15 years	Straight-Line or Sum-of-Years
Buildings (Commercial)	39 years	Straight-Line
Buildings (Residential Rental)	27.5 years	Straight-Line

Note: These are general guidelines. Consult a tax professional for your specific situation.

Tips for Depreciation Planning

Consider Section 179 Deduction

For qualifying assets, you may be able to deduct the full cost in year one instead of depreciating over time. There are annual limits and phase-out thresholds.

Keep Detailed Records

Document purchase dates, costs, and when assets are placed in service. The IRS requires this information for depreciation deductions.

Review Salvage Values Periodically

If an asset's expected salvage value changes significantly, you may need to adjust your depreciation calculations going forward.

Understand Bonus Depreciation

Bonus depreciation allows additional first-year depreciation for qualifying property. Rules change frequently, so check current tax law.

Frequently Asked Questions

What is the simplest depreciation method?

Straight-line depreciation is the simplest. You subtract salvage value from cost, then divide by useful life. A $10,000 asset with $1,000 salvage value and 5-year life depreciates $1,800 per year.

Can I change depreciation methods?

Generally, you need IRS approval to change depreciation methods. Form 3115 is used to request a change. It's best to choose the right method from the start rather than trying to switch later.

What happens when I sell a depreciated asset?

If you sell for more than the book value, you may have depreciation recapture taxed as ordinary income. If you sell for less, you may have a deductible loss. Keep records of the sale.

Do I have to depreciate assets?

For business assets with a useful life over one year, depreciation is generally required. You can't deduct the full cost immediately (unless qualifying for Section 179). Personal assets aren't depreciated.

How is book value different from market value?

Book value is cost minus accumulated depreciation. Market value is what someone would pay for the asset today. They're often different. A well-maintained vehicle might have a market value higher than its book value.

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