Quick answer: A $50,000 asset with a $5,000 salvage value and a 5-year life depreciates $9,000 a year under straight-line. Under double-declining-balance it loses $20,000 in year 1, then $12,000, $7,200, $4,320, and $1,480. Pick a method above to see the full schedule.
Last reviewed: October 2026
Key facts
- Straight-line: (Cost - Salvage) / Useful life, the same expense every year.
- Double-declining-balance: (2 / Useful life) × book value at the start of each year, front-loaded.
- An asset is never depreciated below its salvage value under either method.
- Book value = cost minus accumulated depreciation to date.
A depreciation calculator spreads an asset's cost across its useful life. Enter the asset cost, salvage value, useful life in years, and method to see the annual depreciation expense and a year-by-year book value schedule for straight-line or double-declining-balance.
When a business buys a $50,000 machine, accountants do not record the whole $50,000 as an expense on day one. Instead they spread it across the years the machine earns revenue, a process called depreciation. The method you choose changes each year's reported expense and therefore each year's taxable income. This calculator runs both of the most common methods, straight-line and double-declining-balance, and shows the full book-value schedule so you can compare them side by side.
How to use this depreciation calculator
- Enter the asset cost: what you paid for the asset.
- Enter the salvage value: what you expect it to be worth at the end of its useful life.
- Enter the useful life in years: how long you expect to use it.
- Choose the method: straight-line for equal yearly expense, double-declining for front-loaded expense.
- Click Calculate to see the annual depreciation and the book-value schedule.
Depreciation calculator formulas
Straight-line divides the depreciable base (cost minus salvage) evenly across every year, so the expense never changes. Double-declining-balance applies twice the straight-line rate to the remaining book value each year, which front-loads the expense into the early years when the asset is newest. Under DDB the final year's depreciation is capped so the book value never drops below salvage: that is why the last year of a DDB schedule is often smaller than the formula alone would give.
Straight-line vs declining balance: which depreciation method to choose
Use straight-line when the asset delivers value evenly over its life: office furniture, buildings, and leasehold improvements are classic cases. It is the simplest method and the one most small businesses use for their books. Use double-declining-balance when the asset loses value fastest early on: vehicles, computers, and manufacturing equipment that becomes obsolete quickly. DDB gives larger tax deductions sooner, which is worth more in present-value terms, but it makes early-year profits look smaller.
| Year | Straight-line depreciation | DDB depreciation | DDB book value |
|---|---|---|---|
| 1 | $9,000 | $20,000 | $30,000 |
| 2 | $9,000 | $12,000 | $18,000 |
| 3 | $9,000 | $7,200 | $10,800 |
| 4 | $9,000 | $4,320 | $6,480 |
| 5 | $9,000 | $1,480 | $5,000 |
The table above (for a $50,000 asset, $5,000 salvage, 5-year life) shows the trade-off clearly: DDB expenses $32,000 in the first two years versus $18,000 under straight-line, but straight-line catches up by year 5. Both methods end at the same $5,000 salvage book value.
Worked examples
Example 1: $50,000 machine, $5,000 salvage, 5-year life
Straight-line: ($50,000 - $5,000) / 5 = $45,000 / 5 = $9,000 per year. Book value falls $9,000 each year: $41,000, $32,000, $23,000, $14,000, ending at $5,000. Double-declining rate = 2/5 = 40%. Year 1: 40% × $50,000 = $20,000 (book $30,000). Year 2: 40% × $30,000 = $12,000 (book $18,000). Year 3: 40% × $18,000 = $7,200 (book $10,800). Year 4: 40% × $10,800 = $4,320 (book $6,480). Year 5: 40% × $6,480 = $2,592, but only $1,480 of room remains above salvage, so year 5 = $1,480 (book $5,000).
Example 2: $100,000 delivery van, $20,000 salvage, 5-year life
Straight-line: ($100,000 - $20,000) / 5 = $16,000 per year. Book value: $84,000 after year 1, $68,000 after year 2, $52,000 after year 3, $36,000 after year 4, $20,000 after year 5. A buyer checking the books in year 3 sees a $52,000 carrying value, which is the number that matters for insurance claims and resale negotiations.
Tips for accurate depreciation schedules
- Set salvage realistically. Research resale values for similar used assets; an inflated salvage value understates every year's depreciation.
- Match the method to the asset. Tech equipment that becomes obsolete in three years belongs on an accelerated method, not a 7-year straight-line schedule.
- Track book value separately from market value. Book value is an accounting number; the asset's actual resale price can be higher or lower.
- Keep the schedule with your tax records. The IRS expects consistent depreciation records, and changing methods mid-stream has rules.
- Remember partial years. An asset bought in October usually gets a partial first year; the calculator assumes full years for simplicity.
Common mistakes to avoid
- Depreciating land. Land is never depreciable; only buildings, equipment, vehicles, and similar assets qualify.
- Using cost instead of depreciable base. Straight-line divides (cost minus salvage), not cost alone; forgetting salvage overstates the expense.
- Letting DDB fall below salvage. The final years must be capped so book value never goes under salvage value.
- Confusing book and tax depreciation. IRS tax rules (MACRS, Section 179, bonus depreciation) often differ from the GAAP methods on this page; check IRS Publication 946 for tax filing.
- Forgetting accumulated depreciation on disposal. When you sell, gain or loss is sale price minus current book value, not minus original cost.
Frequently asked questions
What is the straight-line depreciation formula?
Annual depreciation equals (asset cost minus salvage value) divided by useful life in years. A $50,000 asset with a $5,000 salvage value and a 5-year life depreciates $9,000 every year under straight-line.
How does double-declining-balance depreciation work?
Each year's depreciation equals twice the straight-line rate multiplied by the book value at the start of that year. For a 5-year asset the rate is 40%, so year 1 on a $50,000 asset is $20,000. The schedule is capped so book value never falls below salvage.
What is salvage value?
Salvage value (also called residual value) is your estimate of what the asset will be worth at the end of its useful life. Depreciation only spreads the cost above salvage; the book value floor at the end of the schedule equals the salvage value.
What is book value?
Book value is the asset's cost minus all depreciation charged so far (accumulated depreciation). It is the carrying amount on the balance sheet, not necessarily what the asset would sell for on the open market.
Can I switch depreciation methods?
For financial reporting, switching methods is allowed but treated as a change in accounting estimate with disclosure requirements. For US taxes, the IRS prescribes MACRS recovery periods and methods, and Section 179 or bonus depreciation may let you expense qualifying assets immediately.
Which depreciation method gives the biggest tax deduction?
Accelerated methods like double-declining-balance give larger deductions in the early years, which is usually more valuable because of the time value of money. Over the asset's full life, total depreciation is the same under every method: cost minus salvage.
What is the book value after 3 years under double-declining balance?
Using the worked example in this article ($50,000 cost, $5,000 salvage value, 5-year life, 40% rate): year 1 depreciates $20,000, year 2 $12,000, and year 3 $7,200. Accumulated depreciation after 3 years is $20,000 + $12,000 + $7,200 = $39,200, so the book value is $50,000 - $39,200 = $10,800.
How much depreciation is left after the first year under straight-line?
The depreciable base is $50,000 - $5,000 = $45,000. After one year of straight-line depreciation at $9,000, the remaining depreciable amount is $45,000 - $9,000 = $36,000, spread over the remaining 4 years at $9,000 per year.
Sources
- IRS: Publication 946, How to Depreciate Property (MACRS, Section 179, listed property)
- SEC: EDGAR company filings showing how public companies report depreciation
Key takeaways
- Bookmark this tool to rerun schedules when an asset's life or salvage estimate changes.
- Straight-line: ($50,000 - $5,000) / 5 = $9,000 a year, every year.
- DDB at 40%: $20,000, $12,000, $7,200, $4,320, then $1,480 (capped at salvage).
- Book value never drops below salvage under either method.
- Front-loaded methods give bigger early tax deductions; total depreciation is identical.
- Tax depreciation (MACRS, Section 179) follows IRS rules, not these book methods.
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