Depreciation Calculator

How to Use

Enter the asset's original cost, its estimated salvage value at the end of its life, and its useful life in years. Enter which year you want to calculate depreciation for. Switch between straight-line (equal depreciation every year) and double-declining-balance (faster depreciation in early years) to compare methods. Results update live. Changing the "Year to Calculate" field lets you inspect any single year in the asset's life without needing to build a full depreciation schedule by hand, useful for checking a specific year's book value or deduction quickly.

Two Genuinely Different Ways to Spread the Same Cost

Both methods this tool calculates ultimately depreciate the same total amount, an asset's cost minus its salvage value, spread across the same number of years, they only differ in the pattern of how that total gets distributed year to year. Straight-line takes the simplest possible approach, dividing the depreciable amount evenly, the exact same currency figure every single year regardless of the asset's actual age. Double-declining-balance instead front-loads the depreciation, larger deductions in early years, progressively smaller ones later, intended to better match how many physical assets actually lose value in the real world, fastest right after purchase, slower as they age.

Worked Example: Comparing Both Methods Side by Side

Using this tool's own defaults, asset cost of 100,000, salvage value of 10,000, useful life of 9 years. Under straight-line, year 1 depreciation is a flat (100,000 − 10,000) ÷ 9 = 10,000, and this exact same 10,000 repeats every year until the asset reaches its 10,000 salvage value, an 11.11% annual rate. Under double-declining-balance, the rate is 2 ÷ 9 = 22.22% applied to the current book value each year, so year 1 depreciation is 100,000 × 22.22% = 22,222.22, more than double the straight-line figure for the same year. By year 3, declining-balance depreciation has already dropped to about 13,443.07 as book value shrinks, illustrating exactly the front-loaded, tapering pattern the method is designed to produce, compared to straight-line's flat 10,000 repeating unchanged in every year including year 3.

Why the Choice of Method Matters Beyond Just Bookkeeping

Depreciation method choice directly affects how much expense (and therefore how much reduced taxable profit) shows up in any given year, which is why it's not purely a cosmetic accounting preference. A business using double-declining-balance reports lower profit, and often lower tax owed, in an asset's early years compared to straight-line, with the pattern reversing in later years as the double-declining method's deductions shrink below straight-line's flat figure. Total depreciation over the asset's full life is identical either way, only the timing differs, but that timing can matter meaningfully for cash flow and tax planning in any individual year.

Useful Life and Salvage Value Are Estimates, Not Guarantees

Both useful life and salvage value are forward-looking estimates made at the time an asset is purchased, not measured facts, and both directly shape every year's depreciation figure this calculator produces. A shorter estimated useful life spreads the same depreciable amount over fewer years, producing larger annual depreciation, while a higher estimated salvage value shrinks the depreciable amount itself (cost minus salvage), reducing every year's depreciation proportionally. Many businesses set these estimates using published guidelines for common asset categories (vehicles, machinery, computer equipment) rather than guessing from scratch, worth checking if you're depreciating a common asset type rather than something unusual.

Frequently Asked Questions

What's the difference between straight-line and declining-balance depreciation?

Straight-line depreciation spreads the same amount evenly across every year. Double-declining-balance depreciates faster in early years and slower later, applying a fixed rate to the shrinking book value each year, common for assets that lose value quickly upfront.

What is salvage value?

Salvage value is the estimated resale or scrap value of an asset at the end of its useful life. Both depreciation methods stop reducing book value once it reaches salvage value, an asset is never depreciated below what it could still be sold for.

Why does depreciation exist as an accounting concept?

Depreciation spreads the cost of a long-lasting asset across the years it's actually used, rather than recording the entire cost as an expense in the single year it was purchased. This gives a more accurate picture of a business's profitability each year, matching the cost of using the asset against the revenue it helps generate over its useful life, instead of showing an artificially large loss in the purchase year and artificially high profit in every year after.

Which depreciation method should I use, straight-line or double-declining-balance?

Straight-line is simpler and appropriate for assets that lose value at a roughly steady pace over their life, office furniture or a building, for example. Double-declining-balance better reflects assets that lose most of their value early, like vehicles or computer equipment, which are worth noticeably less the moment they're put into use and continue losing value quickly in the first few years. Many tax systems also specify which method is required or permitted for different asset categories, check local tax rules before choosing a method for a real filing.

Why does double-declining-balance depreciation slow down in later years?

Because the depreciation rate is applied to the asset's current, already-shrinking book value each year, not to the original cost. As book value falls, the same percentage rate produces a progressively smaller currency amount of depreciation, which is exactly the front-loaded pattern the method is designed to produce, larger deductions early, tapering off as the asset ages, mirroring how many real assets actually lose most of their market value in their first few years of use.

Can book value ever drop below salvage value?

No, both methods in this calculator are built to stop reducing book value once it reaches salvage value, an asset is never depreciated below what it's still estimated to be worth at disposal. This calculator's double-declining-balance mode specifically checks each year's calculated depreciation against this floor and caps it if needed, so book value lands exactly at salvage value rather than dropping below it even in the asset's final years.