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Depreciation Calculator

Everyday

Calculate asset depreciation using Straight Line (SLM) or Written Down Value (WDV) method. Find annual depreciation and depreciation rate for your assets.

Reviewed by the thecalcu.com team · Last updated July 14, 2026

Depreciation Method

Equal depreciation each year — simple and commonly used.

$
$
Useful Life
years

Year 1 Depreciation

$0

0.00% per year · Straight Line

Total Depreciation

$0

Book Value at End

$0

Asset Cost

$500,000

Useful Life

5 years

What is a Depreciation?

A depreciation calculator computes the annual reduction in an asset's value over its useful life, using either the Straight Line Method (SLM) or the Written Down Value (WDV, also called declining balance) method, and builds a year-by-year schedule of depreciation charges and book value. It replaces the manual work of computing a WDV rate by hand, which requires a fractional exponent, and the tedious construction of a multi-year depreciation table.

Depreciation is a foundational concept in both financial accounting and tax planning. When a business buys a fixed asset, machinery, a vehicle, computer equipment, furniture, or commercial property, the full cost typically can't be deducted all at once in the year of purchase. Instead, that cost gets spread across the asset's useful life through periodic depreciation charges, which lower taxable income each year the asset is in service. In the US, actual tax depreciation generally follows the IRS's MACRS system along with elections like Section 179 expensing and bonus depreciation, a more prescriptive framework than the general SLM/WDV models this calculator demonstrates.

For financial reporting under US GAAP, businesses have more flexibility: they choose a depreciation method and useful life estimate that reasonably reflects how an asset is consumed, and apply it consistently. SLM is the most common choice for buildings, furniture, and long-life equipment where value loss is fairly even year to year. WDV/declining balance better fits assets like vehicles and technology, where the biggest value drop happens early.

This calculator is built for that financial-reporting and planning use case: model an asset's expected depreciation pattern, generate a year-by-year schedule, and understand how method choice changes the timing of expense recognition, all before finalizing numbers with an accountant for actual tax filing purposes.

For evaluating the return on a depreciating asset, the ROI Calculator works alongside depreciation data to model net asset profitability. For calculating gain or loss on the eventual sale of a depreciated asset, use the Profit & Loss Calculator.

Who Should Use This Calculator?

Small business owners and self-employed professionals, contractors, consultants, freelancers, and shop owners who've bought computers, vehicles, furniture, or equipment can use this to understand their annual depreciation expense before working with a tax preparer on the actual deductible amount.

Bookkeepers and accounting students, building trial balances, income statements, and balance sheets for clients or coursework requires accurate depreciation figures for each fixed asset. The year-by-year schedule makes it easy to check whether accumulated depreciation on the books matches the expected calculated amount, a standard reconciliation step.

Finance and accounting students, depreciation calculations are core material in financial accounting coursework. This calculator helps verify textbook problems and see exactly how the WDV rate is derived from the residual-value formula, a concept that trips up a lot of students the first time through.

Business owners weighing asset replacement timing, knowing an asset's book value at any point in its life helps estimate the accounting gain or loss on early disposal, which matters when deciding whether to replace equipment now or keep running it. A sale price above book value creates a taxable gain; a sale below book value creates a loss.

Businesses applying for asset-backed financing, lenders often evaluate collateral at book value. Understanding an asset's current book value (original cost minus accumulated depreciation) helps in preparing accurate loan documentation and understanding how much debt the asset can realistically support.

What Insights Does the Depreciation Calculator Give You?

Year 1 Depreciation is the depreciation charge in the asset's first year. Under SLM, this equals every later year's charge (uniform throughout). Under WDV, this is the largest depreciation figure you'll ever see for the asset, since it's calculated against the full original cost. For planning, Year 1 Depreciation is the reduction in book income the asset generates in its purchase year.

Depreciation Rate is the annual percentage rate at which the asset depreciates. Under SLM, it's simply 100 ÷ Useful Life (20% for a 5-year asset, for instance). Under WDV, it's the custom rate derived from cost, salvage value, and life, typically higher than the SLM rate in the early years even though both converge to the same total depreciation.

Total Depreciation is the sum of all depreciation charged over the full useful life, equal to Asset Cost minus Salvage Value under either method. This is the maximum amount recoverable through depreciation expense over the asset's lifetime, divide by asset cost to see what share of the purchase price gets recovered this way.

Book Value at End is the asset's value on the books at the end of its useful life, equal to the Salvage Value you entered. If the actual eventual sale price differs from this figure, the difference shows up as a gain or loss on disposal.

How to use this Depreciation calculator

  1. Enter the Asset Cost, the original purchase price, including freight, installation, and any costs required to get the asset into working condition. Leave out later capital improvements; those should be tracked as separate additions to asset cost.

  2. Enter the Salvage Value, your best estimate of what the asset will be worth at disposal. For vehicles, scrap or resale value often runs 10–20% of original cost; for computers and most technology, it's frequently close to zero; for commercial real estate, land value alone can represent significant residual value.

  3. Set the Useful Life, in years, based on how long you realistically expect to use the asset in the business, or a standard estimate for the asset class (vehicles: 5 years, computers: 3 years, office furniture: 7 years, general equipment: 5–10 years are common planning assumptions).

  4. Select the Depreciation Method, choose Straight Line for equal annual charges (simpler, common for buildings and furniture), or Written Down Value for front-loaded depreciation (a better match for vehicles and fast-obsolescing tech). Switching the toggle instantly recalculates every output.

  5. Review the schedule and plan ahead, note Year 1 Depreciation for near-term planning, and scroll the year-by-year table to find book value at any specific point, useful for insurance renewal, financing applications, or timing a disposal decision.

Formula & Methodology

Straight Line Method (SLM):

Annual Depreciation = (Asset Cost − Salvage Value) ÷ Useful Life

SLM Rate = 100 ÷ Useful Life (%)

Book Value after year k = Asset Cost − (k × Annual Depreciation)

Written Down Value (WDV):

WDV Rate = (1 − (Salvage Value ÷ Asset Cost)^(1÷Useful Life)) × 100 (%)

Year 1 Depreciation = Asset Cost × WDV Rate

Year k Depreciation = Book Value₍k₋1₎ × WDV Rate

Book Value after year k = Book Value₍k₋1₎ − Year k Depreciation

Where:
- Asset Cost = original purchase price ($)
- Salvage Value = estimated residual value at end of life ($)
- Useful Life = number of years the asset stays in service

Worked example (SLM), $50,000 machine with $5,000 salvage value, 5-year life:

Annual Depreciation = ($50,000 − $5,000) ÷ 5 = $9,000/year
SLM Rate = 100 ÷ 5 = 20% per year
Total Depreciation = $9,000 × 5 = $45,000
Book Value at End = $50,000 − $45,000 = $5,000 (= Salvage Value ✓)

Worked example (WDV), same asset:

WDV Rate = (1 − ($5,000 ÷ $50,000)^(1÷5)) × 100
= (1 − (0.1)^0.2) × 100 = (1 − 0.6310) × 100 = 36.90% per year

| Year | Opening Balance | Depreciation | Closing Balance |
|---|---|---|---|
| 1 | $50,000 | $18,450 | $31,550 |
| 2 | $31,550 | $11,642 | $19,908 |
| 3 | $19,908 | $7,346 | $12,562 |
| 4 | $12,562 | $4,635 | $7,927 |
| 5 | $7,927 | $2,927 | $5,000 ✓ |

Assumptions:
- Depreciation is calculated for full years. Real-world tax rules, including MACRS half-year and mid-quarter conventions, often apply partial-year depreciation in the year an asset is placed in service; that pro-ration isn't applied here.
- The WDV rate formula mathematically converges book value to the salvage value by the end of useful life; rounding across intermediate years may cause small differences.
- For a zero salvage value under WDV, the rate formula produces an unrealistic 100% first-year result, use a nominal salvage value instead, or switch to SLM.
- This calculator models general accounting depreciation, not IRS MACRS schedules, confirm actual tax-deductible depreciation with a CPA before filing.

Quick Reference

Method Depreciation pattern Typical use case
Straight Line (SLM) Equal every year Buildings, furniture, long-life equipment
Written Down Value (WDV) High early, declining Vehicles, computers, fast-obsolescing tech

For related planning tools, the Simple Interest Calculator is useful when comparing the cost of financing an asset purchase against paying cash and losing value to depreciation instead.

Frequently Asked Questions

Depreciation is the systematic allocation of an asset's cost over its useful life, recognizing that physical assets, machinery, vehicles, computers, furniture, lose value through use, wear, and obsolescence. It matters for two reasons: for accounting purposes, it matches the cost of an asset against the revenue it helps generate over time; for tax purposes, depreciation is a deductible expense that reduces taxable income in each period it's claimed.
Under the Straight Line Method, the same dollar amount is charged as depreciation every year across the asset's useful life. Annual depreciation = (Asset Cost − Salvage Value) ÷ Useful Life in years. For a $50,000 asset with $5,000 salvage value and a 5-year life, SLM depreciation is $9,000 per year. It's the more common choice when usage is expected to be consistent year over year, buildings, furniture, and long-life equipment are typical candidates.
In the Written Down Value method (also called the declining balance method), depreciation is charged as a fixed percentage of the book value remaining at the start of each year, so depreciation is highest in the early years and gradually shrinks. This mirrors how many assets actually lose value in the real world: a vehicle or a laptop loses more value in year one than in year five.
SLM produces equal depreciation every year, tracing a straight line down to the salvage value. WDV produces higher depreciation early and lower depreciation later, tracing a curved decline. Both methods add up to the same total depreciation over the asset's life (Asset Cost minus Salvage Value), only the timing of when that expense is recognized differs. SLM is simpler and common for financial reporting; WDV better reflects real-world value loss for vehicles and technology.
This calculator models the general SLM and WDV (declining balance) accounting methods, not IRS tax depreciation specifically. For actual US federal tax filings, businesses typically use MACRS (Modified Accelerated Cost Recovery System), along with Section 179 expensing and bonus depreciation elections, which follow IRS-published recovery periods and percentage tables rather than a simple salvage-value formula. Use this calculator to understand and plan depreciation conceptually, but confirm exact tax-deductible amounts with a CPA or IRS Form 4562 instructions before filing.
Salvage value (also called residual value or scrap value) is the estimated amount an asset could be sold for at the end of its useful life. It's subtracted from the asset cost before calculating depreciation, representing the portion of cost that will eventually be recovered at disposal. A $50,000 machine with $5,000 salvage value has a depreciable base of $45,000. Setting salvage value to zero depreciates the asset fully to nil, appropriate for assets with no expected resale value, like custom software or specialized tooling.
Book value is an asset's recorded value on the balance sheet after subtracting accumulated depreciation from its original cost. After year 1, book value = Asset Cost − Year 1 Depreciation; after year n, it equals cost minus all depreciation charged through year n. At the end of the useful life, book value should equal salvage value if the rate was calculated correctly. Book value shows up in loan collateral valuations, insurance claims, and asset sale negotiations.
Annual Depreciation = (Asset Cost − Salvage Value) ÷ Useful Life in years, and Depreciation Rate = 100 ÷ Useful Life. For a $30,000 piece of equipment with zero salvage value and a 3-year life: Annual Depreciation = $30,000 ÷ 3 = $10,000 per year; Rate = 33.33% per year. Book value falls to $20,000 after year 1, $10,000 after year 2, and $0 after year 3. This calculator automates that math and also builds the full year-by-year schedule.
Enter the Asset Cost, the original purchase price including installation and transportation. Enter the Salvage Value, your estimated resale or scrap value at the end of useful life (set to 0 if none is expected). Set the Useful Life in years. Select the Depreciation Method, Straight Line for equal annual charges, or Written Down Value for front-loaded depreciation. The calculator returns Year 1 Depreciation, the depreciation rate, total depreciation over the useful life, and book value at the end.
For financial reporting under US GAAP, a company should apply a consistent depreciation method for each class of assets, and changing methods mid-life requires disclosure as a change in accounting estimate. For federal tax purposes, MACRS recovery periods and methods are largely prescribed by asset class, so there's little discretion to switch once a method is elected on a return. In both cases, treat a mid-life switch as something to run past an accountant, not something to change casually in a spreadsheet.
The WDV rate is derived from asset cost, salvage value, and useful life: Rate = (1 − (Salvage Value ÷ Asset Cost)^(1÷Useful Life)) × 100. For a $50,000 asset with $5,000 salvage value and a 5-year life: Rate = (1 − (5,000÷50,000)^(1÷5)) × 100 = (1 − (0.1)^0.2) × 100 = (1 − 0.631) × 100 ≈ 36.9% per year. Applied to the declining book value each year, this rate mathematically drives book value down to exactly the salvage value by the end of useful life.
The WDV rate formula involves raising a ratio of salvage to cost to a fractional power, and that ratio is zero when salvage value is zero, which technically produces a 100% depreciation rate in year one, an unrealistic result for most real assets. In practice, use a small nominal salvage value (like $1) instead of exactly zero when modeling WDV, or switch to the Straight Line method, which handles a zero salvage value cleanly.

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Also known as
asset depreciationWDV calculatorstraight line depreciationSLM depreciationbook value calculator