Depreciation Calculator

What Is Depreciation? Depreciation is the systematic allocation of an asset’s cost over its useful life. It reflects the decline in value of a physical asset (machinery, vehicles, equipment, buildings) due to use, wear, and obsolescence.

Four Standard Methods

1. Straight-Line (SL) Annual Depreciation = (Cost − Salvage Value) / Useful Life The same amount is expensed each year. Simple, predictable. Most common for buildings and office equipment.

2. Double Declining Balance (DDB) Rate = 2 / Useful Life Year N depreciation = Book Value at Start of Year × Rate Book value cannot fall below salvage value. Accelerated method — higher expense in early years. Common for assets that lose value quickly (vehicles, computers, machinery).

3. Sum of Years Digits (SYD) SYD = Life × (Life + 1) / 2 Year N Depreciation = ((Life − N + 1) / SYD) × (Cost − Salvage Value) Also accelerated — front-loads expense but more gradually than DDB.

4. Units of Production (UOP) Depreciation per Unit = (Cost − Salvage Value) / Total Estimated Units Annual Depreciation = Units Used in Year × Depreciation per Unit Ties depreciation directly to actual use — ideal for manufacturing equipment and vehicles with known mileage.

Key Terms

• Cost: original purchase price of the asset
• Salvage Value: estimated value at end of useful life (scrap value)
• Depreciable Base: Cost − Salvage Value
• Book Value: Cost − Accumulated Depreciation to date

Tax vs Financial Accounting For tax purposes, many jurisdictions use MACRS (in the US), which allows even more accelerated depreciation. For financial reporting (GAAP/IFRS), straight-line is most common. This calculator uses accounting depreciation, not tax depreciation.

Choosing a Method Use accelerated methods when:

• The asset generates more revenue/value early in its life
• You want to reduce taxable income in early years Use straight-line when:
• The asset generates equal benefit each year
• Simplicity is preferred