How to use the depreciation calculator
- 1Enter the asset cost: the purchase price plus delivery, installation and anything needed to get it working.
- 2Enter the salvage value, the amount you expect to sell or scrap it for at the end. Use 0 if it will be worth nothing.
- 3Enter the useful life in whole years.
- 4Choose a method. For declining balance, pick 1.5× or 2× (double declining) and whether to switch to straight-line when that gives a larger charge.
- 5Read the first-year charge in the results and the full year-by-year schedule below the calculator.
Straight-line depreciation
Straight-line spreads the cost evenly. Take the cost, subtract the salvage value, and divide by the useful life. It is the simplest method and the most common one in company accounts, and it suits assets that wear out at a steady pace, such as furniture or shop fittings.
Annual depreciation = (Cost − Salvage value) ÷ Useful life
Declining balance and double declining balance
Declining balance charges a fixed percentage of the remaining book value each year, so the charge is largest in year one and shrinks after that. The rate is a multiple of the straight-line rate: 2× is called double declining balance, and 1.5× is the 150% method. For a 5-year life, the straight-line rate is 20%, so double declining uses 40%.
Salvage value is not subtracted before applying the rate, but the book value is never allowed to fall below it. Left alone, the method also never reaches salvage exactly, so the calculator lets the final year take whatever is left. It can also switch to straight-line on the remaining value in the year that gives a bigger charge, which is common practice.
Accelerated methods suit assets that lose value fast or are most productive when new, such as vehicles, computers and machinery.
Rate = Multiple ÷ Useful life Depreciation = Opening book value × Rate (capped so book value stays at or above salvage)
Sum-of-the-years'-digits
This method is also front-loaded, but less steeply than double declining. Add up the digits of the useful life (for 5 years, 1 + 2 + 3 + 4 + 5 = 15). Each year, multiply the depreciable amount by the years remaining divided by that sum: 5/15 in year one, 4/15 in year two, and so on.
Sum of digits = n × (n + 1) ÷ 2 Depreciation in year y = (Cost − Salvage) × (n − y + 1) ÷ Sum of digits
Book depreciation is not tax depreciation
These are accounting methods for your financial statements. Tax rules set their own schedules and allowances. In the US, most business assets use MACRS with set recovery periods, and Section 179 or bonus depreciation can allow a larger first-year deduction. Canada uses capital cost allowance classes, and the UK replaces depreciation with capital allowances such as the Annual Investment Allowance. Many EU countries publish official useful-life tables.
Rules and limits change, so check with your tax authority or an accountant before using any figure on a tax return.
Worked example
A business buys a delivery van for $50,000, expects to sell it for $5,000 after 5 years, and uses double declining balance (2 ÷ 5 = 40% a year).
| Year 1 | $20,000 depreciation, book value $30,000 |
| Year 2 | $12,000 depreciation, book value $18,000 |
| Year 3 | $7,200 depreciation, book value $10,800 |
| Year 4 | $4,320 depreciation, book value $6,480 |
| Year 5 | $1,480 depreciation, book value $5,000 |
| Total depreciation | $45,000 |
In year 5, 40% of $6,480 would be $2,592, which would push the van below its $5,000 salvage value, so the charge is capped at $1,480. Straight-line would give $9,000 every year, and sum-of-the-years'-digits would give $15,000, $12,000, $9,000, $6,000 and $3,000. All three reach the same $45,000 in total.