Depreciation Calculator

How the depreciation calculator works

Depreciation spreads the cost of a long-lived asset across the years it is actually used, instead of dumping the whole purchase into one month's numbers. A $50,000 machine that runs for five years is not a $50,000 expense in year one — it is roughly $10,000 of expense per year, and the schedule below is the bookkeeping that makes that idea concrete. Two ideas drive every method here: the depreciable base (what you are allowed to write off) and the book value (cost minus everything written off so far).

The four methods, and how they differ

Straight-line

The same amount every year. Subtract salvage value from cost, divide by useful life, and you are done. It is the easiest to audit and the easiest to explain, which is why it dominates financial statements. Its assumption is that the asset gives up value at a constant rate, which fits things like furniture, a building shell, or a leasehold improvement better than it fits a delivery van.

Declining balance

An accelerated method. You pick a factor — 1.5× is the 150% method, 2× is the familiar double-declining balance — and apply factor ÷ life as a fixed rate against a book value that shrinks every year. Because the rate hits a smaller base each year, the expense falls off quickly. That creates a problem at the end: a percentage of a shrinking number never reaches zero. Real fixed-asset software solves this by checking, every single year, whether plain straight-line on the remaining depreciable book value would produce a bigger deduction than declining balance. When it does, the schedule switches to straight-line and stays there. This calculator implements that switch, so the asset lands precisely on salvage value in the final year rather than drifting.

Sum-of-years-digits

Also accelerated, but with a fixed, predictable pattern rather than a percentage of a moving balance. For a 5-year asset, the digits 5+4+3+2+1 sum to 15, so year one gets 5/15 of the depreciable base, year two gets 4/15, and so on down to 1/15. It front-loads less aggressively than double-declining balance and, unlike declining balance, it needs no switching rule — the fractions add to exactly one, so the schedule always terminates at salvage on its own.

MACRS

The Modified Accelerated Cost Recovery System is the method US federal tax law generally requires for property placed in service after 1986. It is not a formula you derive; it is a published percentage table you apply to the original cost. This page hard-codes the official half-year-convention GDS tables for 3, 5, 7, 10, 15, and 20-year property, and each one sums to exactly 100%. Two things surprise people. First, MACRS ignores salvage value completely and writes the basis down to zero, which is why that input disappears when you select it. Second, the half-year convention pretends every asset was placed in service at the midpoint of year one, so half a year of depreciation gets pushed off the back end — a 5-year asset produces six rows, and a 7-year asset produces eight.

Reading the schedule

Total depreciation is identical across straight-line, declining balance, and sum-of-years-digits for the same asset: you can never write off more than cost minus salvage, no matter how you slice it. What changes is timing. Accelerated methods pull expense forward, which lowers early book income and early taxable income, and raises both later on. That timing matters for anything keyed to book value or reported earnings — loan covenants, a gain or loss calculation if you sell the asset early, or how your balance sheet reads to an outside party. The donut shows how much of the original cost has come off by the end of the schedule; the table shows the path it took to get there.

This is planning math, not tax advice

Use these numbers to model and compare, not to file. Real returns involve rules this calculator does not touch: the mid-quarter convention (which replaces the half-year convention if too much property lands in the final quarter), the alternative depreciation system, listed-property limits, and vehicle caps. Section 179 expensing and bonus depreciation are separate elections that can let you deduct a large share — sometimes all — of an asset in year one, and their dollar limits and percentages change from year to year. They interact with everything above. Before you commit to a method or book an entry, confirm the treatment with a CPA who can see your full picture.