SamCalculator

Depreciation Calculator

Calculate asset depreciation using straight-line, declining balance, and sum-of-the-years’-digits methods with detailed accounting schedules.

Asset Details

Equal annual expense across the useful life of the asset.

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Round all schedule values to whole units

Partial-year

Prorate year 1 by purchase date / convention

What is Depreciation?

Depreciation is the accounting process of allocating the cost of a tangible fixed asset over its useful life. Instead of writing off a $50,000 vehicle the year you buy it, accountants spread that cost across the years the asset actually generates value. The result is a smoother income statement, a more honest profit picture, and a measurable book value that tracks how much of the asset remains to be expensed.

U.S. businesses use depreciation for two distinct purposes — financial reporting under GAAP (where straight-line is the default) and tax reporting under the IRS Modified Accelerated Cost Recovery System (MACRS). This calculator handles the three core book-depreciation methods plus optional Section 179 expensing and bonus depreciation, so you can model both views. For deeper context, see our compound interest calculator and simple interest calculator — the same time-value-of-money intuition shows up everywhere in finance.

Why Depreciation Matters in Accounting

Matches expense with revenue

Depreciation honors the matching principle — costs are recognized in the same periods as the revenue the asset helps generate, producing a more accurate net income.

Reduces taxable income

Each year's depreciation expense lowers taxable income. For capital-intensive businesses this is one of the largest non-cash tax deductions on the return.

Tracks remaining book value

The balance sheet shows net book value (cost − accumulated depreciation). Lenders, investors, and valuators all rely on it when assessing capital structure.

Supports better capital planning

Knowing how an asset will depreciate helps you plan replacement schedules, model cash flow, and decide whether to repair, replace, or finance the next purchase.

The Three Core Depreciation Methods

1

Straight-Line

Equal annual expense across the useful life. Formula: (Cost − Salvage) ÷ Useful Life. The default for GAAP financial statements — predictable, simple, and ideal for assets that wear evenly like buildings or office furniture.

2

Declining Balance

Accelerated method that applies a fixed rate to the remaining book value each year. Double-declining balance (200%) is the most common variant. Best for assets that lose value or productivity faster early in their life — vehicles, computers, and machinery.

3

Sum of the Years' Digits

Front-loaded fractional method. Year n uses (Life − n + 1) ÷ Sum of digits. Smoother than declining balance but still accelerated. Useful for assets whose service value drops gradually rather than sharply.

How to Use This Depreciation Calculator

  1. 1

    Pick your depreciation method

    Use the tab selector at the top to choose between Straight Line, Declining Balance, or Sum of the Years' Digits — based on how the asset loses value and which reporting framework you're using.

  2. 2

    Enter cost and salvage value

    Asset cost should include freight, installation, and any setup fees needed to put the asset in service. Salvage (or residual) value is your honest estimate of what the asset will be worth when retired.

  3. 3

    Set the useful life

    Enter the number of years the asset will produce value. For tax-style estimates, U.S. MACRS class lives are 5 years (vehicles, computers), 7 years (most machinery), 27.5 years (residential rental), or 39 years (commercial buildings).

  4. 4

    Open advanced settings if needed

    Toggle partial-year depreciation for mid-year purchases, choose a convention (half-year is the U.S. default), and layer in Section 179 expensing or bonus depreciation if your asset qualifies.

  5. 5

    Calculate and review

    Click Calculate to generate the full year-by-year schedule. Use the method comparison to see how the same asset would depreciate under all three methods — then export to CSV, PDF, or print for your records.

Key Depreciation Terms

Book value vs market value

Book value is cost minus accumulated depreciation — the asset's value as carried on the balance sheet. Market value is what a willing buyer would pay today. The two often diverge — a fully depreciated truck still drives, and a brand-new computer loses 30% of resale value the day it's unboxed.

Salvage value

Also called residual or scrap value, this is the estimated amount you'd recover at the end of the asset's useful life — auction value of a forklift, trade-in value of a vehicle, or zero for assets you scrap. Salvage value reduces the depreciable base under straight-line and SYD; declining balance ignores it in the formula but clamps the book value at salvage.

Accumulated depreciation

The running total of every year of depreciation expense so far. It appears as a contra-asset account on the balance sheet, paired with the original cost. Cost − accumulated depreciation = current book value.

Useful life

An estimate of how long the asset will be productive. The IRS publishes prescribed class lives in Publication 946 for tax purposes; for book purposes, management uses its best judgement based on the asset type, expected usage, and the company's historical experience.

Partial-year depreciation

Most assets are not bought on January 1. Conventions like Half-Year (the U.S. default for most equipment), Mid-Quarter, and Mid-Month prorate the first and final year so the schedule isn't artificially inflated.

Section 179 & bonus depreciation

Two U.S. tax accelerators. Section 179 lets you expense up to a dollar limit of qualifying property immediately in year 1. Bonus depreciation lets you deduct a percentage (currently phasing down from 100%) of the remaining basis the same year. Both are tax-only — book depreciation continues on the remainder.

Depreciating Common Asset Classes

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Vehicles & Fleet

Cars, trucks, vans, and light trucks are 5-year MACRS property. Most U.S. tax preparers use the Half-Year convention with double-declining balance switching to straight-line. Luxury auto caps under IRC §280F may limit annual deductions for passenger vehicles.

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Machinery & Equipment

General-purpose machinery is typically 7-year MACRS property; certain manufacturing equipment is 5 years. Heavy use or single-shift operation may justify a shorter book life than the IRS class. Section 179 is heavily used here.

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Commercial Real Estate

Nonresidential buildings (offices, warehouses, retail) depreciate over 39 years straight-line with a mid-month convention. Land is never depreciated — only the improvements. Cost segregation studies can reclassify components into faster classes.

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Residential Rental

Residential rental property (single-family rentals, duplexes, apartments) is 27.5-year straight-line with mid-month. The shorter class life gives residential landlords a meaningful annual non-cash deduction against rental income.

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Computers & Office Tech

Computers, servers, and peripherals are 5-year MACRS property. Many businesses pair this with Section 179 to expense the entire purchase in year 1 — making computers one of the most tax-efficient capex categories.

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Furniture & Fixtures

Office furniture, fixtures, and similar property are 7-year MACRS. Book depreciation typically runs straight-line over 5–10 years depending on the company's policy. Track installation and freight in the asset cost.

The Depreciation Formulas

Every method this calculator supports comes from a closed-form formula. Here are the three most common — the same equations used in introductory accounting textbooks, IRS Publication 946, and FASB guidance.

Straight Line

(Cost − Salvage) ÷ Life

Annual expense is constant. Used for GAAP financial statements as the default.

Declining Balance

BV × (Factor ÷ Life)

Multiply remaining book value by a fixed rate each year. 2× is double-declining; 1.5× is 150% DB.

Sum of Years' Digits

(Life − n + 1) ÷ SYD × Base

Where SYD = N(N+1)/2 — front-loads expense but smoother than DB.

Tax Depreciation in the United States

MACRS

The Modified Accelerated Cost Recovery System is the U.S. federal tax depreciation rulebook. It assigns each asset to a class life (5, 7, 15, 27.5, or 39 years) and prescribes a depreciation method (200% DB switching to SL for most personal property, SL for real property).

Section 179 expensing

Lets you immediately deduct the cost of qualifying tangible personal property (machinery, vehicles over 6,000 lbs, off-the-shelf software) up to an annual dollar limit. The deduction phases out as total Section 179 purchases exceed a second threshold.

Bonus depreciation

Allows additional first-year depreciation of a percentage of the remaining basis. After 100% in 2017–2022, the percentage is phasing down: 80% (2023), 60% (2024), 40% (2025), 20% (2026), 0% (2027), absent further legislation.

Half-year & mid-quarter

Conventions that prevent businesses from gaming the placed-in-service date. Half-year treats every asset as placed at midyear. Mid-quarter applies if 40%+ of personal property is placed in the fourth quarter — slowing year-1 deductions on bunched purchases.

For details, see IRS Publication 946 (How to Depreciate Property). This calculator estimates depreciation using common book methods — consult a CPA for a binding MACRS-compliant tax schedule.

Built for accountants, small business owners, investors, and finance students.

Methodology reviewed against IRS Publication 946 and FASB conceptual guidance — see our methodology and editorial policy. Educational only — not tax or investment advice.

Frequently Asked Questions

Depreciation is the accounting practice of allocating the cost of a tangible fixed asset over its useful life rather than expensing it all in year 1. It produces an annual depreciation expense on the income statement and a corresponding reduction in book value on the balance sheet — matching the cost of using the asset with the revenue it helps generate.

You enter the asset cost, salvage value, useful life, and pick a method (straight-line, declining balance, or sum-of-the-years'-digits). The calculator applies the corresponding formula to produce a year-by-year schedule of expense, accumulated depreciation, and remaining book value. Advanced settings let you layer in partial-year proration, Section 179 expensing, and bonus depreciation.

Straight-line is the simplest and most common depreciation method. Annual expense = (Cost − Salvage Value) ÷ Useful Life. Each year you recognize the same expense, producing a clean diagonal book-value line from cost down to salvage. It's the default method under U.S. GAAP for financial reporting.

Declining balance multiplies the asset's remaining book value by a fixed rate each year — typically 2× the straight-line rate (double-declining balance, or DDB) or 1.5× (150% DB). It front-loads depreciation, recognizing more expense in early years and less later. Salvage value is honored as a floor — the book value will not drop below it.

Salvage value (also called residual or scrap value) is the estimated amount you'll recover when the asset is retired — trade-in value, auction price, or scrap value. Under straight-line and sum-of-the-years'-digits, salvage reduces the depreciable base. Under declining balance, it acts as a floor that the book value cannot fall below.

Three main reasons: (1) it matches the cost of the asset with the revenue it generates over time, producing a more accurate income statement; (2) it reduces taxable income each year, giving the business a meaningful non-cash tax deduction; and (3) it tracks how much value remains in each asset, supporting better capital planning and lender / investor disclosures.

Accumulated depreciation is the running sum of every year of depreciation expense that has been recognized so far. It appears on the balance sheet as a contra-asset paired with the original cost — and the difference between the two is the current book value (Cost − Accumulated Depreciation = Net Book Value).

Book value is the asset's value as carried on the balance sheet — original cost minus accumulated depreciation. It is generally different from market value (what a buyer would pay today) and from tax basis (which reflects MACRS, Section 179, and bonus depreciation rather than book depreciation).

Partial-year depreciation adjusts the first (and final) year's expense to reflect when the asset was placed in service. The Half-Year convention treats every purchase as if it happened mid-year (50% of annual depreciation in year 1 and year N+1). Mid-Quarter and Mid-Month are stricter conventions used for tax purposes and for real estate.

There's no single best method. Use straight-line when the asset wears evenly (buildings, furniture) or when you want predictable financial statements. Use declining balance for assets that lose value or productivity fastest in their early years (vehicles, computers). Use sum-of-the-years'-digits when you want some acceleration without the steepness of declining balance. For U.S. tax filings, the method is often prescribed by the IRS MACRS class life — consult a CPA when in doubt.

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