Depreciation Calculator

Depreciation Calculator
Calculate asset depreciation using different methods

Depreciation Inputs

Depreciation Methods Explained

Straight-line Depreciation

The straight-line method spreads the cost of the asset evenly over its useful life. It's the simplest and most commonly used depreciation method.

Formula: (Cost - Salvage Value) / Useful Life

Double Declining Balance

This accelerated depreciation method applies a rate twice that of the straight-line rate to the declining book value of the asset. It results in larger depreciation expenses in the earlier years.

Formula: 2 × (1 / Useful Life) × Remaining Book Value

Sum-of-Years-Digits

This method allocates larger depreciation amounts in the earlier years and smaller amounts in later years. It calculates depreciation based on the sum of the digits of the years.

Formula: (Remaining Life / Sum of Years) × (Cost - Salvage Value)

Units of Production

This method bases depreciation on the actual usage or production of the asset, rather than time. It's useful for assets where usage varies significantly from year to year.

Formula: (Cost - Salvage Value) / Total Expected Units × Units Produced in Period

About Depreciation

What is Depreciation?

Depreciation is an accounting method used to allocate the cost of a tangible asset over its useful life. It represents how the economic value of an asset is used up over time and allows businesses to expense a portion of the asset's cost each year rather than all at once.

Why Depreciation Matters

  • Financial Reporting: Accurately represents the decreasing value of assets on financial statements
  • Tax Benefits: Provides tax deductions that can reduce taxable income
  • Asset Management: Helps track the remaining useful life and value of business assets
  • Business Planning: Assists in planning for asset replacement and capital expenditures

Common Depreciation Methods

Different methods distribute the depreciable amount (asset cost minus salvage value) over the asset's useful life in different ways:

  • Straight-line: Equal depreciation each year (most common and simplest)
  • Accelerated: Higher depreciation in earlier years (e.g., Double Declining Balance)
  • Activity-based: Depreciation based on actual usage (e.g., Units of Production)

Use this calculator to see how different depreciation methods affect the annual depreciation amounts and book value of your assets over time.

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Depreciation Tips

Business Considerations

  • Match the method to the asset: Choose a depreciation method that best reflects how the asset's value decreases over time
  • Be consistent: Use the same depreciation method for similar assets for clearer financial reporting
  • Consider tax implications: Different depreciation methods can provide different tax benefits
  • Review asset life estimates: Periodically reassess whether your estimated useful life and salvage value are still accurate

Common Assets and Typical Useful Lives

Asset Type Typical Useful Life
Computer Equipment 3-5 years
Office Furniture 7-10 years
Vehicles 5-7 years
Machinery & Equipment 7-20 years
Buildings 27-39 years
Land Improvements 15-20 years
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