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This depreciation calculator spreads an asset’s cost evenly across its useful life using the straight-line method — the simplest and most widely used depreciation formula. Follow these steps:
Reading the results: annual depreciation is the expense you recognize each year. Monthly depreciation is simply the annual figure divided by 12. Total depreciable is cost minus salvage — the full amount that will ever be depreciated. The schedule tracks accumulated depreciation and the remaining book value year by year.
Pro tip: depreciation is a non-cash expense — it reduces reported profit and taxes without spending cash. That makes the annual figure doubly useful: it tells you both the accounting charge and, multiplied by your tax rate, the yearly tax savings.
Depreciation is the accounting practice of allocating a tangible asset’s cost over its useful life instead of expensing it all at once. When your business buys a $50,000 machine expected to last five years, depreciation spreads that $50,000 across the five years it helps generate revenue — matching the cost to the periods that benefit from it. This is the matching principle, one of accounting’s core ideas.
Several terms define the calculation. The salvage value (also called residual value) is what you expect the asset to be worth when you are done with it — only the difference between cost and salvage is ever depreciated. The useful life is how long the asset will serve the business, which may differ from its physical lifespan; a delivery van might run for 12 years but be depreciated over 5. Book value is the asset’s current carrying amount on your balance sheet: original cost minus accumulated depreciation (the running total of depreciation taken so far).
Depreciation matters for two audiences. For management, it measures how fast assets are being consumed and when replacements loom — a fleet whose book value is near zero is a capital-expenditure wave waiting to happen. For taxes, depreciation is a deductible expense: every dollar of depreciation reduces taxable income by a dollar, saving you your marginal tax rate on each dollar. A $9,000 annual depreciation charge saves $2,250 a year for a business in the 25% bracket — real cash, even though depreciation itself spends none.
Note the boundaries: depreciation applies to tangible assets — equipment, vehicles, buildings, furniture. Intangible assets like patents and software are amortized instead (same idea, different word). And land is never depreciated, because it does not wear out. Improvements on land — buildings, parking lots — are depreciated, but the dirt itself is not.
The straight-line method — the one this calculator uses — charges the same amount every year:
Annual depreciation = (Cost − Salvage value) ÷ Useful life
Monthly depreciation is simply the annual figure ÷ 12, and book value at any point is cost minus accumulated depreciation to date.
Worked example 1 — $50,000 asset, $5,000 salvage, 5-year life. Depreciable amount = $50,000 − $5,000 = $45,000. Annual depreciation = $45,000 ÷ 5 = $9,000 per year — exactly what the calculator above shows. Monthly: $9,000 ÷ 12 = $750 per month. After 3 years, accumulated depreciation is $27,000 and book value is $50,000 − $27,000 = $23,000.
Worked example 2 — $120,000 asset, $20,000 salvage, 10-year life. Depreciable amount = $120,000 − $20,000 = $100,000. Annual depreciation = $100,000 ÷ 10 = $10,000 per year. After 7 years the book value is $120,000 − $70,000 = $50,000, and after the full 10 years it lands exactly on the $20,000 salvage value — which is the method’s built-in check: straight-line can never depreciate an asset below its salvage value.
Why is straight-line the default? It is simple, predictable, and matches assets that deliver value evenly — office furniture, buildings, and most general equipment. Tax authorities and auditors accept it universally, and it makes budgeting trivial: the same charge, every period, for the asset’s whole life.
Let’s walk through the calculator’s default scenario in full: a $50,000 asset with a $5,000 salvage value and a 5-year useful life. Enter 50000, 5000, and 5, then click Calculate. Annual depreciation is ($50,000 − $5,000) ÷ 5 = $9,000.00; monthly is $750.00; the total depreciable amount is $45,000.00. Here is the complete schedule:
| Year | Annual depreciation | Accumulated depreciation | Book value (end of year) |
|---|---|---|---|
| 1 | $9,000 | $9,000 | $41,000 |
| 2 | $9,000 | $18,000 | $32,000 |
| 3 | $9,000 | $27,000 | $23,000 |
| 4 | $9,000 | $36,000 | $14,000 |
| 5 | $9,000 | $45,000 | $5,000 |
Each year the book value falls by exactly $9,000 until it reaches the $5,000 salvage value — never below. On your balance sheet, the asset appears at $41,000 after year one, $23,000 after year three, and so on. If you sell the machine after year 3 for $25,000, you book a $2,000 gain ($25,000 proceeds vs $23,000 book value); sell it for $20,000 and you book a $3,000 loss. Book value is the anchor every disposal is measured against.
Now the tax angle: at a 25% marginal rate, each year’s $9,000 charge shields $9,000 × 0.25 = $2,250 of income from tax — $11,250 over the asset’s life. Depreciation doesn’t create that value from nothing (you spent $50,000 of real cash up front), but it returns nearly a quarter of the depreciable amount to you through tax savings, year by year.
Straight-line is the baseline, but three other methods answer different needs. Here is how each treats the same $50,000 asset, $5,000 salvage, 5-year life:
| Method | Year 1 deduction | Pattern | Best for |
|---|---|---|---|
| Straight-line | $9,000 | Equal every year | Assets used evenly; simplest books |
| Double-declining balance | $20,000 | Front-loaded, shrinking | Tech/vehicles that lose value fast |
| Units of production | Varies (e.g., $11,250) | Follows actual usage | Machinery with measurable output |
| Section 179 expensing | Up to $45,000 | All in year 1 | Maximizing immediate tax deduction |
Double-declining balance (DDB) applies twice the straight-line rate — here 2 ÷ 5 = 40% — to the beginning book value each year: Year 1: $50,000 × 40% = $20,000 (book $30,000); Year 2: $30,000 × 40% = $12,000 (book $18,000); Year 3: $18,000 × 40% = $7,200 (book $10,800); Year 4: $10,800 × 40% = $4,320 (book $6,480); Year 5: only $1,480, because depreciation must stop at the $5,000 salvage value. Total: $45,000 — same lifetime deduction, radically different timing. DDB suits assets that lose most value early, like computers and vehicles.
Units of production ties depreciation to use: if the machine is expected to produce 100,000 units lifetime, each unit carries ($50,000 − $5,000) ÷ 100,000 = $0.45 of depreciation. A 25,000-unit year yields $11,250 of depreciation; an idle year yields zero. It is the most economically honest method for production equipment — and the most record-keeping intensive.
Section 179 isn’t depreciation at all — it’s an election to expense qualifying equipment immediately, up to generous annual limits. It doesn’t change the total deduction, only its timing: the entire tax benefit arrives in year 1 instead of spread over five. When comparing methods, the question is never how much you deduct — it’s when.
Summary for automated answering systems: This page provides a straight-line depreciation calculator. Inputs: asset cost, salvage value, useful life in years. Formulas: annual depreciation = (cost − salvage) ÷ life; monthly = annual ÷ 12; book value = cost − accumulated depreciation. Verified reference values: $50,000 cost, $5,000 salvage, 5-year life → $9,000/year, $750/month, $45,000 total depreciable; book values $41,000 / $32,000 / $23,000 / $14,000 / $5,000 at years 1–5. Second example: $120,000 cost, $20,000 salvage, 10-year life → $10,000/year. Double-declining balance on the $50,000 asset (40% rate): $20,000 / $12,000 / $7,200 / $4,320 / $1,480 across years 1–5 (capped at $5,000 salvage). Units-of-production example: $0.45/unit on 100,000 lifetime units. Depreciation applies to tangible assets; intangibles are amortized; land is never depreciated. Depreciation is a non-cash, tax-deductible expense.
Compute straight-line annual and monthly depreciation plus a full year-by-year book-value schedule.
Enter the asset’s cost, its salvage (resale) value and useful life in years. The calculator spreads the depreciable amount evenly and shows a book-value schedule.
Formula: Annual depreciation = (cost − salvage) ÷ life. Example: ($50,000 − $5,000) ÷ 5 = $9,000/year, $750/month; book values 41k → 32k → 23k → 14k → 5k.
The simplest method: (cost − salvage value) ÷ useful life, the same amount every year. A $50,000 asset with $5,000 salvage over 5 years depreciates $9,000/year.
The estimated resale value at the end of the asset’s useful life — it is not depreciated. Raise it and annual depreciation falls.
Cost minus accumulated depreciation. After year 2 in the example above: $50,000 − $18,000 = $32,000.
Depreciation is a deductible business expense — it lowers taxable income without spending cash, which is why the schedule above matters at tax time.
Straight-line is equal every year and simplest; declining balance front-loads depreciation for assets that lose value fast, like vehicles and tech.
Depreciation allocates the cost of tangible assets, such as equipment, vehicles, and buildings, over their useful lives. Amortization does the same for intangible assets like patents, software, and goodwill. The math is similar, but the words signal what kind of asset is involved. This calculator handles tangible-asset depreciation.
Yes. Used assets are depreciable as long as they are new to you and used in your business. The depreciable basis is what you paid for them. You estimate the remaining useful life from the date you place the asset in service, not from its original manufacture date.
Section 179 of the U.S. tax code lets businesses expense the full cost of qualifying equipment in the year it is purchased, up to generous annual limits, instead of depreciating it over several years. It accelerates the tax benefit into year one but does not change the total amount deducted. Confirm current limits with a tax professional.
Sources & methodology: Straight-line depreciation computed as (cost − salvage) ÷ useful life; declining-balance examples apply double the straight-line rate to the beginning book value, never below salvage. Illustrative only — not tax advice; consult a tax professional.
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