Depreciation Calculator
Free depreciation calculator. Calculate asset depreciation with straight-line, double declining, sum-of-years, and units of production methods.
$
$
years
$9,000.00
year 1
$45,000.00
Cost - Salvage
$9,000.00
through year 1
$41,000.00
end of year 1
Depreciation Schedule
| year | Annual Depreciation | Accumulated | Book Value |
|---|---|---|---|
| Start | - | $0.00 | $50,000.00 |
| 1 | $9,000.00 | $9,000.00 | $41,000.00 |
| 2 | $9,000.00 | $18,000.00 | $32,000.00 |
| 3 | $9,000.00 | $27,000.00 | $23,000.00 |
| 4 | $9,000.00 | $36,000.00 | $14,000.00 |
| 5 | $9,000.00 | $45,000.00 | $5,000.00 |
Method Formulas
Straight-Line: (Cost - Salvage) / Useful Life = $9,000.00/year
Double Declining: Book Value × (2 / Life) = 40.00% rate
Sum-of-Years: (Cost - Salvage) × (Remaining Years / SYD) where SYD = 15
Units of Production: (Cost - Salvage) / Total Units × Units Produced
MACRS Tax Depreciation Reference
For US tax purposes, most businesses use MACRS (Modified Accelerated Cost Recovery System).
| Property Class | Examples | Year 1 Rate |
|---|---|---|
| 3-year | Tractors, tools | 33.33% |
| 5-year | Vehicles, computers, office equipment | 20% |
| 7-year | Office furniture, machinery | 14.29% |
| 15-year | Land improvements, fences | 5% |
| 27.5-year | Residential rental property | 3.636% |
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Last updated: January 2026
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Frequently Asked Questions
What is depreciation and why is it important for businesses?
Depreciation allocates an asset's cost over its useful life, reflecting wear and tear. It's crucial for businesses because: (1) It reduces taxable income, lowering tax liability. (2) It shows true profit by matching expenses to revenue. (3) It helps plan for asset replacement. Example: A $50,000 machine with 10-year life creates $5,000 annual depreciation expense, reducing taxable income by $5,000 each year while the business actually keeps the cash.
What is the difference between straight-line and accelerated depreciation?
Straight-line spreads cost evenly: ($10,000 - $1,000) / 5 years = $1,800/year. Accelerated methods (double declining, sum-of-years) front-load expenses. Double declining: Year 1 = $10,000 × 40% = $4,000; Year 2 = $6,000 × 40% = $2,400. Choose straight-line for simplicity and steady expenses. Use accelerated to maximize early tax deductions or when assets lose value quickly (tech equipment, vehicles).
When should I use units of production depreciation?
Units of production works best when asset wear relates directly to usage, not time. Formula: (Cost - Salvage) / Total Units × Units Used. Examples: Manufacturing equipment (per machine hour), vehicles (per mile), mining equipment (per ton extracted). A delivery truck: ($30,000 - $5,000) / 150,000 miles = $0.167/mile. If you drive 30,000 miles, depreciation = $5,000. This matches expense to actual productivity.
What is the difference between book depreciation and tax depreciation (MACRS)?
Book depreciation (GAAP) aims for accurate financial reporting—any reasonable method, any useful life estimate. Tax depreciation (MACRS in US) follows strict IRS rules with fixed recovery periods: 5 years for computers/vehicles, 7 years for furniture, 27.5 years for residential property. Companies often maintain two sets of records. Book might show $2,000/year for 10 years; MACRS might show $3,333/year for 5 years on the same asset.
How do I determine salvage value for an asset?
Salvage value is what you expect to sell the asset for at the end of its useful life. Methods: (1) Research resale markets for similar used assets. (2) Use 5-10% of original cost as a rule of thumb. (3) For tax purposes, MACRS assumes zero salvage. Examples: A $40,000 car might have $8,000 salvage (20%) after 5 years. Computer equipment often has near-zero salvage due to rapid obsolescence. Heavy machinery might retain 10-15% value.