Depreciation Calculator

How to Use This Depreciation Calculator

• Asset Cost — the purchase price of the asset.
• Salvage Value — estimated value at the end of its useful life.
• Useful Life — how many years the asset will be used.
• Method — straight-line, double-declining balance, or units of production.

What Is Depreciation?

Depreciation is the accounting process of spreading the cost of a long-lived asset — equipment, vehicles, machinery — across the years it is used, rather than expensing it all at once. This matches the cost of the asset to the periods that benefit from it, giving a more accurate picture of profit each year, and it carries real tax consequences because depreciation is a deductible expense.

The three common methods serve different purposes. Straight-line spreads the cost evenly and is the simplest and most widely used. Double-declining balance is an accelerated method that front-loads more depreciation into the early years, useful for assets that lose value quickly. Units of production ties depreciation to actual usage, which fits assets whose wear depends on output rather than time. The right method affects both your reported profit and your tax position.

Depreciation Formulas

Example Calculation

A $50,000 asset with a $5,000 salvage value and 5-year life, straight-line:

• Depreciable base = $50,000 − $5,000 = $45,000
• Annual depreciation = $45,000 ÷ 5 = $9,000 per year
• After year 1, book value = $41,000

Common Mistakes to Avoid

• Forgetting salvage value. You only depreciate cost minus salvage, not the full cost (except in some accelerated methods).
• Confusing book and tax depreciation. US tax depreciation (MACRS) often differs from book methods; talk to your accountant.
• Using the wrong useful life. The IRS assigns recovery periods by asset class for tax purposes.
• Mixing up depreciation and market value. Book value is an accounting figure, not what the asset would sell for.

Depreciation for Small Business

Depreciation directly affects your profit, your balance sheet, and your tax bill — and the method and timing choices (including Section 179 and bonus depreciation for tax) can meaningfully change what you owe. Getting fixed assets recorded and depreciated correctly is core bookkeeping work that many businesses get wrong, leaving money on the table or creating problems at tax time.

Our bookkeeping team keeps your fixed asset register clean and your depreciation accurate, and can coordinate book and tax treatment with your accountant. If your asset records need attention, a free call is a good place to start.

Frequently Asked Questions

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