Depreciation Calculator FAQ
Depreciation spreads the cost of a tangible asset over its useful life. It reflects how assets such as equipment, machinery, and vehicles are consumed over time.
Straight-line depreciation spreads the depreciable amount evenly across the useful life. The formula is D = (C - SV) / n, where C is cost, SV is salvage value, and n is useful life.
Declining balance depreciation applies a fixed rate to the asset’s current book value (also called written-down value), so earlier years usually show higher depreciation expense: D = Book value × rate. Double declining balance is the most common version, using a rate of 2 / useful life.
Add up the digits of the useful life — for a 5-year life, that’s 5+4+3+2+1 = 15 — then each year’s depreciation is the depreciable base times the remaining life over that sum. For a 120,000 depreciable base and a 5-year life, year 1 depreciation is 120,000 × 5/15 = 40,000, year 2 is 120,000 × 4/15 = 32,000, and so on, giving more depreciation to earlier years without the fixed rate used in declining-balance methods.
Salvage value, also called residual value, is the estimated value of the asset at the end of its useful life. It is subtracted from cost to determine the amount that can be depreciated.
Use it as an estimate only. Tax depreciation often follows specific local rules, recovery periods, conventions, and method requirements that can differ from accounting depreciation.
It is useful for accounting estimates, budgeting, asset replacement planning, financial models, and comparing how different depreciation methods affect expense and book value over time.
