Asset Depreciation Calculator
Calculate asset depreciation using straight-line or declining balance methods.
See annual depreciation, accumulated depreciation, and book value.
Asset depreciation is the accounting process of spreading the cost of a long-lived business asset over its useful life rather than expensing it all in the year of purchase. The two most common methods are straight-line and declining balance (double declining balance).
Method 1 — Straight-Line Depreciation: Annual Depreciation = (Cost − Salvage Value) ÷ Useful Life Book Value at Year N = Cost − (Annual Depreciation × N)
Method 2 — Double Declining Balance (DDB): DDB Rate = 2 ÷ Useful Life Annual Depreciation (Year N) = Book Value at Start of Year × DDB Rate Book Value = Previous Book Value − Depreciation Taken (Switch to straight-line in the year where straight-line produces a higher deduction)
What each variable means:
- Cost — original purchase price of the asset, including installation, shipping, and setup costs.
- Salvage Value (Residual Value) — estimated value of the asset at the end of its useful life.
- Useful Life — estimated years of productive use. IRS MACRS provides standardized useful life tables (e.g., computers = 5 years, vehicles = 5 years, commercial real estate = 39 years).
- Book Value — the remaining un-depreciated cost on your accounting records.
IRS MACRS useful life reference:
- Computers and peripherals: 5 years
- Vehicles (non-luxury): 5 years
- Office furniture: 7 years
- Residential rental property: 27.5 years
- Commercial real estate: 39 years
Worked example: A business buys manufacturing equipment for $50,000. Salvage value: $5,000. Useful life: 7 years.
Straight-Line: Annual Depreciation = ($50,000 − $5,000) ÷ 7 = $6,428.57/year Book value after 3 years = $50,000 − (3 × $6,428.57) = $30,714
Double Declining Balance: DDB Rate = 2 ÷ 7 = 28.57% Year 1: $50,000 × 28.57% = $14,286 depreciation; book value = $35,714 Year 2: $35,714 × 28.57% = $10,204 depreciation; book value = $25,510 Year 3: $25,510 × 28.57% = $7,289 depreciation; book value = $18,221
DDB front-loads deductions — valuable when you want to maximize early-year tax savings. Consult a tax professional for actual filing decisions.