# Depreciation Calculator Estimate annual and accumulated depreciation of business assets using straight-line or declining balance methods for accurate accounting. --- - **Canonical URL:** https://dothecalculation.com/calculators/depreciation-calculator - **Category:** Business tools - **Publisher:** Do The Calculation (https://dothecalculation.com) - **Cost:** Free, no account or sign-up required - **Privacy:** Runs entirely in the browser; inputs are never sent to a server - **Methodology:** https://dothecalculation.com/methodology - **Reviewed by:** Dr. Marcus Sterling, PhD, PhD in Public Economics, University of Chicago (https://dothecalculation.com/about/team/marcus-sterling) --- ## Estimate straight-line depreciation Calculate the annual depreciation expense and depreciable base of business assets over their useful life. - Straight-line depreciation expense - Depreciable base calculations - Asset salvage value allowance ## Straight-line depreciation basics Depreciation is an accounting method that allocates the cost of a tangible asset over its useful life. This matches the asset cost with revenue generated by its use, preventing large capital expenses from distorting income statements in a single year. Straight-line depreciation is the simplest and most common method. It assumes the asset loses value at an equal rate each year: subtracting salvage value from initial cost, then dividing by estimated useful years. ## How to Use This Calculator Enter the asset's initial purchase value, its estimated salvage (residual) value at the end of its useful life, and the useful life in years. The calculator subtracts salvage value from initial value to get the depreciable base, then divides that base by the useful life to return a flat annual depreciation expense. ## Worked Example: $10,000 Asset Over 5 Years A business buys a piece of equipment for $10,000, expects to sell it for $1,000 in scrap or resale value after it's retired, and plans to use it for 5 years. Depreciable base: $10,000 − $1,000 = $9,000. Annual depreciation: $9,000 ÷ 5 = $1,800 per year — the same $1,800 expense is recorded on the income statement every year for 5 years, and the asset's book value drops by $1,800 annually until it reaches the $1,000 salvage value. ## Related Calculators To model the tax impact of depreciating a major equipment purchase alongside its return, use the [CapEx ROI calculator](/calculators/capex-roi-calculator). To evaluate the operating profitability of the business using this asset, see the [EBITDA calculator](/calculators/ebitda-calculator), which adds depreciation and amortization back to operating income. ## Frequently asked questions ### What is salvage value? Salvage value (or residual value) is the estimated book value of an asset at the end of its useful life, representing what it can be sold for or scrapped for when retired. ### What is the useful life of an asset? Useful life is the estimated time period that an asset remains productive and usable for business operations. Tax departments (such as the IRS) dictate standard useful lives for different asset classes. ### How does straight-line depreciation differ from declining balance? Straight-line depreciation allocates an equal expense amount to every year of an asset’s useful life. Declining balance is an accelerated method that records higher depreciation expenses in early years and lower expenses in later years. ### What is Section 179 depreciation? Section 179 is a tax rule that allows businesses to deduct the full purchase price of qualifying equipment, vehicles, or software in the tax year it is placed in service, rather than depreciating it over several years. ### How do I calculate partial-year depreciation? If an asset is purchased mid-year, the first year’s depreciation is calculated pro-rata based on the months it was in service. The standard convention is the mid-month or half-year convention, depending on tax regulations. ### What is accumulated depreciation on the balance sheet? Accumulated depreciation is a contra-asset account that stores the total depreciation expenses recorded against an asset since it was acquired. Subtracting it from the historical cost yields the asset’s net book value. ### What happens to depreciation if I sell the asset early? If you sell an asset before its useful life ends, you compare the sales price to the asset’s net book value. If you sell it for more than book value, you record a taxable gain; if less, you record a loss. ### Can intangible assets be depreciated? No, intangible assets (like patents, trademarks, copyrights, and goodwill) cannot be depreciated. Instead, their cost is allocated over time using a similar process called amortization. ### What is the difference between CapEx and OpEx for assets? Capital Expenditures (CapEx) are funds used to acquire major physical assets with a useful life exceeding one year; these must be depreciated. Operating Expenses (OpEx) are ongoing business expenses deducted immediately in the current tax year. ### How do I determine the recovery period for an asset? For tax purposes, recovery periods are defined by standard tax schedules (like MACRS in the US). For example, office furniture is standardly depreciated over 7 years, computers over 5 years, and residential property over 27.5 years. ### How does bonus depreciation work? Bonus depreciation allows businesses to deduct a large percentage (often 60% to 100% depending on the tax year) of the cost of eligible business assets immediately in the first year, applied after any Section 179 deductions. ### What is the net book value of an asset? Net book value is the asset’s original purchase cost minus its total accumulated depreciation. It represents the remaining unallocated value of the asset on the business’s financial books. ## Related concepts - **Depreciable base** — The cost of an asset that is depreciated, calculated as initial value minus salvage value. - **Straight-line depreciation** — The method of allocating cost evenly across all years of useful life. ## Related guides - [Depreciation Calculation Methods: Straight-Line First, Tax Rules Second](https://dothecalculation.com/blog/business/depreciation-calculation-methods) — Calculate straight-line depreciation from cost, salvage value, and useful life, then understand when declining balance, units-of-production, MACRS, Section 179, or bonus depreciation may require separate tax review. - [Break-Even Analysis: Formula, Example, and Calculator](https://dothecalculation.com/blog/business/break-even-analysis) — Calculate break-even units and revenue from fixed costs, selling price, and variable cost, then test how pricing or cost changes affect the result. ## Related calculators - [Days Sales Outstanding (DSO) Calculator](https://dothecalculation.com/calculators/days-sales-outstanding-calculator) — Calculate Days Sales Outstanding and accounts receivable turnover ratio to measure how efficiently your business collects customer payments. - [Inventory Turnover & DSI Calculator](https://dothecalculation.com/calculators/inventory-turnover-calculator) — Calculate inventory turnover ratio, days sales in inventory, and carrying costs to see how efficiently stock moves through your business. - [Working Capital & Liquidity Calculator](https://dothecalculation.com/calculators/working-capital-calculator) — Measure business liquidity with working capital, current ratio, quick ratio, cash ratio, and Days Inventory Outstanding calculations. - [Break-Even Calculator](https://dothecalculation.com/calculators/break-even-calculator) — Calculate the exact units or revenue needed to cover fixed and variable costs and find your break-even point before turning a profit. - [Debt Service Coverage Ratio (DSCR) Calculator](https://dothecalculation.com/calculators/dscr-calculator) — Calculate Debt Service Coverage Ratio and surplus cash flow to analyze your ability to repay loans and qualify for new financing. - [Retail Open-to-Buy (OTB) Planner](https://dothecalculation.com/calculators/open-to-buy-calculator) — Plan monthly inventory purchasing budgets from sales forecasts, markdowns, and inventory targets to avoid overstock and stockouts. --- _This calculator is for educational and business planning purposes only and does not constitute professional financial, tax, or legal advice. Verify all rates, margins, and contract terms before making operational business decisions._ --- _Source: [Do The Calculation](https://dothecalculation.com/calculators/depreciation-calculator). Quote freely with attribution and a link to this page._