Home / Financial / Depreciation Calculator
Depreciation Calculator: Straight-Line, Declining Balance, Sum-of-Years
Enter what an asset cost, what it should be worth at the end of its useful life, and how many years it lasts. Pick a method to get the yearly depreciation expense and book value.
The three methods and their formulas
Depreciation spreads the cost of a long-lived asset over the years in which it is used. The depreciable amount is cost − salvage value, and each method decides how much of it to charge each year.
- Straight-line:
(cost − salvage) ÷ lifeevery year. The expense is level. - Declining balance:
book value at start of year × factor ÷ life. The rate is applied to the remaining book value, so the charge falls each year. A factor of 2 is called double declining balance. The charge is capped so book value never drops below salvage. - Sum-of-the-years-digits:
(cost − salvage) × remaining life ÷ (n × (n + 1) ÷ 2). For a five-year life the digits add to 15, so year one takes 5/15 of the depreciable amount, year two 4/15, and so on.
Checking the numbers by hand
Take cost 10,000, salvage 1,000 and a five-year life. The depreciable amount is 9,000. Straight-line charges 1,800 a year. Sum-of-the-years-digits uses digits that add to 15, so it charges 9,000 × 5/15 = 3,000, then 2,400, 1,800, 1,200 and 600. Double declining balance uses a 40% rate on the shrinking book value: 4,000, 2,400, 1,440, 864, and a final charge limited to 296 so that the book value stops at 1,000.
All three methods charge the same total over the life of the asset. They differ only in timing.
Which method to choose
Straight-line suits assets that give about the same benefit every year, such as a building fitting or office furniture. Accelerated methods, meaning declining balance and sum-of-the-years-digits, put more expense in the early years. They are used when an asset loses value or usefulness faster when it is new, as vehicles and technology often do.
The method you may use for financial reporting or for tax depends on local accounting standards and tax law, and tax systems often prescribe their own classes, lives and rates. This calculator shows the underlying arithmetic only. Confirm the permitted method with your accountant or tax authority before using the figures in a return.
Assumptions and limits
- Whole years. Schedules start at the beginning of year one. Assets bought mid-year usually need a partial first-year charge, which is not modelled here.
- Estimates drive the answer. Useful life and salvage value are judgements. A small change in either shifts every year's charge.
- Book value is not market value. The remaining figure is an accounting number and can differ a lot from what the asset would sell for.
- Pure declining balance may not reach salvage. If it ends above salvage, the page warns you.
Depreciation is a non-cash expense. It reduces reported profit but does not move money. For the cash view of a purchase, see the payback period calculator.
Worked example
A delivery van costs 25,000, is expected to be worth 3,000 after five years, and is depreciated using double declining balance.
Inputs
| Asset cost | 25000 |
|---|---|
| Salvage (residual) value | 3000 |
| Useful life | 5 years |
| Method | Declining balance |
| Declining-balance factor | 2.0 (double declining) |
Result
Declining balance over 5 years. Book value after the last year: 3,000.00.
| Depreciable amount (cost − salvage) | 22,000.00 |
|---|---|
| First-year depreciation | 10,000.00 |
| Last-year depreciation | 240.00 |
| Total depreciation | 22,000.00 |
| Book value at the end | 3,000.00 |
Depreciation schedule
| Year | Depreciation expense | Accumulated depreciation | Book value at year end |
|---|---|---|---|
| 1 | 10,000.00 | 10,000.00 | 15,000.00 |
| 2 | 6,000.00 | 16,000.00 | 9,000.00 |
| 3 | 3,600.00 | 19,600.00 | 5,400.00 |
| 4 | 2,160.00 | 21,760.00 | 3,240.00 |
| 5 | 240.00 | 22,000.00 | 3,000.00 |
Financial disclaimer: Results are estimates for planning and education. They are not financial, tax or legal advice. Fees, taxes, rates and rules vary by lender, product and country, so confirm figures with your provider or a qualified adviser before making decisions.
Frequently asked questions
What is depreciation?
It is the allocation of an asset's cost over its useful life, recognising that the asset is used up gradually. It appears as an expense each year and reduces the asset's book value.
What is salvage value?
Salvage value, or residual value, is the amount you expect to recover when you dispose of the asset at the end of its useful life. It is not depreciated.
What is double declining balance?
It is a declining-balance method that applies twice the straight-line rate to the remaining book value each year. A five-year asset has a straight-line rate of 20%, so double declining uses 40%.
Why does the last-year charge look odd for declining balance?
The charge is limited so the book value does not fall below the salvage value. That can make the final year's expense smaller than the one before it.
Can I use this figure for my tax return?
Only as a cross-check. Tax rules often require specific methods, asset classes, lives and rates, which differ by country and change over time.
Related calculators
References and sources
- IFRS Foundation: IAS 16 Property, Plant and Equipment covers depreciation methods, useful life and residual value. Link
- Weygandt, Kimmel and Kieso, Financial Accounting: chapters on long-lived assets and depreciation.