Depreciation Calculator (Straight-Line, DDB, SYD, MACRS, Units)

Depreciation is how the cost of a long-lived asset is spread across the years it serves, turning a large one-time purchase into a series of yearly expenses that match the cost to the periods that benefit from it. It is one of the most common calculations in accounting and engineering economics, needed for financial statements, for tax returns, and for the after-tax cash-flow analysis behind any investment decision.

This calculator builds the complete year-by-year schedule, the depreciation expense, the accumulated depreciation, and the falling book value, for the five methods most used in practice: straight-line, declining balance, sum-of-years-digits, MACRS, and units of production. It shows the schedule as a table and the book value as a chart, and it lets you switch methods to see how each spreads the cost differently.

Whether you are preparing accounts, filing taxes, sizing the depreciation tax shield for an investment appraisal, or simply learning how the methods behave, the full schedule and the ability to compare methods on one set of inputs are what make the tool genuinely useful rather than a single-answer box.

What depreciation is and why it matters

When a business buys an asset that will last for years, such as a machine, a vehicle, or a building, accounting principles do not let it record the whole cost as an expense in the year of purchase, because that would understate profit that year and overstate it in every later year the asset is used. Instead the cost is allocated across the asset useful life through depreciation, so each year bears a fair share of the cost.

This matching of cost to benefit gives a truer measure of profit, and it also tracks the declining value of the asset on the balance sheet, where the book value falls as depreciation accumulates. Depreciation applies to tangible assets with a finite life; land is not depreciated because it does not wear out, and intangible assets are amortised under similar principles.

Understanding depreciation is essential for anyone reading financial statements, preparing a tax return, or evaluating a capital investment.

Crucially, depreciation is a non-cash expense: recording it moves no money, unlike paying a wage or a supplier. Yet it has a very real financial consequence through tax, because a depreciation expense reduces taxable income and so lowers the tax bill. That saving is cash the business keeps, which is why the method and timing of depreciation matter well beyond the accounts, feeding directly into the cash flows that determine whether an investment creates value.

Straight-line depreciation

The straight-line method is the simplest and most widely used. It spreads the depreciable cost, the purchase cost minus the expected salvage value, evenly across the useful life, so the depreciation expense is the same every year.

If an asset costs fifty thousand, is expected to be worth five thousand at the end of a five-year life, and is depreciated straight-line, the depreciable cost is forty-five thousand and the annual depreciation is nine thousand, and the book value steps down by nine thousand each year until it reaches the five thousand salvage value.

Straight-line suits assets that provide roughly constant service over their lives and is the default for most financial reporting because it is transparent and easy to audit. It is also the benchmark against which accelerated methods are compared, and it is the method other methods switch to when doing so gives a larger deduction late in the asset life.

Declining balance and double declining balance

Declining balance is an accelerated method that records more depreciation early and less later, matching assets that lose value or usefulness quickly, such as computers and many vehicles. It works by applying a fixed rate to the book value at the start of each year rather than to the depreciable cost, so as the book value falls the depreciation falls with it.

The most common variant is double declining balance, which uses twice the straight-line rate: for a five-year asset the straight-line rate is twenty percent, so the double declining rate is forty percent, giving a large first-year deduction that then tapers. Because the rate is applied to book value, the method would never quite reach the salvage value on its own, so two refinements are standard and are built into this calculator. First, depreciation is floored so book value never drops below salvage.

Second, the method switches to straight-line on the remaining book value in the later years, once that yields a larger deduction than continuing to decline, which ensures the asset is fully depreciated to its salvage value by the end. A 150 percent variant is also available for a gentler acceleration.

Sum-of-years-digits

Sum-of-years-digits is another accelerated method, gentler than double declining balance but still front-loading the expense, and it has the neat property of reaching the salvage value exactly at the end of the life without any need to switch methods. The name describes the calculation: add the digits of the years of life, so a five-year asset gives five plus four plus three plus two plus one, which is fifteen.

Each year depreciation is the remaining life divided by that sum, multiplied by the depreciable cost. In the first year of a five-year asset the fraction is five fifteenths, in the second four fifteenths, and so on to one fifteenth in the final year. Applied to a depreciable cost of forty-five thousand, this gives fifteen thousand, twelve thousand, nine thousand, six thousand, and three thousand across the five years.

Sum-of-years-digits is a good choice when you want acceleration that is smooth and self-completing, and the calculator produces the whole schedule from a cost, salvage, and life.

MACRS: the United States tax system

MACRS, the Modified Accelerated Cost Recovery System, is the depreciation method required for most business assets on United States federal income tax returns, and it works differently from the general methods. Rather than a formula you apply, it is a set of percentage tables published by the IRS: each asset is assigned to a property class, commonly three, five, seven, ten, fifteen, or twenty years, and each year you multiply the original cost by the published percentage for that year of that class.

MACRS is accelerated, based on declining balance switching to straight-line, but it has two features worth stressing. It ignores salvage value entirely, depreciating the asset all the way to zero, and it applies a half-year convention, treating every asset as placed in service in the middle of its first year, which is why a five-year property is actually written off over six tax years. The five-year class percentages are twenty, thirty-two, nineteen point two, eleven point five two, eleven point five two, and five point seven six.

This calculator has the standard half-year tables for the common classes built in, so selecting MACRS and a class produces the correct schedule immediately.

Units of production

Units of production depreciation links the expense to how much the asset is actually used rather than to the mere passing of time, which suits machinery, vehicles, and equipment whose wear is driven by output. You first find the depreciation rate per unit by dividing the depreciable cost by the total number of units the asset is expected to produce over its life. Then, each year, depreciation is that per-unit rate multiplied by the units produced in the year, so a busy year carries more depreciation than a slow one.

An asset costing fifty thousand with a five thousand salvage value expected to produce one hundred thousand units has a rate of forty-five cents per unit, so producing thirty thousand units in a year gives thirteen thousand five hundred of depreciation. The method reflects real usage faithfully but requires a credible estimate of total lifetime output and year-by-year tracking of production.

The calculator takes the total lifetime units and a list of units produced per year and caps total depreciation at the depreciable cost.

Book value, salvage, and the schedule

Whatever method you choose, the schedule tracks three linked quantities year by year. The depreciation expense is the amount charged in the year. The accumulated depreciation is the running total of all depreciation to date. The book value is the original cost minus the accumulated depreciation, the value of the asset on the accounts, and it falls each year toward the salvage value.

Under straight-line the book value declines in equal steps; under accelerated methods it drops steeply at first and levels off; under MACRS it falls to zero because salvage is ignored. Salvage value, or residual value, is your estimate of what the asset will be worth at the end of its life, and in all methods except MACRS it is the floor that depreciation respects.

Reading the schedule tells you the expense to record each year, the current book value for the balance sheet, and the point at which the asset is fully depreciated. The calculator presents all of this as a scrollable table alongside a chart of the declining book value.

Choosing a method

The choice of method turns on purpose. For financial statements, most businesses use straight-line because it is simple, predictable, and gives a smooth expense that auditors and readers find easy to follow, and it suits assets that deliver steady service. Where an asset genuinely loses value or productivity faster early on, an accelerated method, double declining balance or sum-of-years-digits, matches the expense to that pattern more faithfully. For United States tax the choice is largely made for you:

MACRS is mandated, and because it is accelerated it defers tax by front-loading deductions, which is valuable. Units of production is the right method when usage, not time, drives wear, and you can measure output. Many companies keep two sets of depreciation figures, straight-line for their published accounts and MACRS or another accelerated method for tax, which is entirely normal.

Because this calculator computes every method from the same inputs, you can see side by side how each would spread the cost before deciding.

Depreciation, taxes, and investment analysis

Depreciation earns its importance in investment analysis through the tax shield. Although it is a non-cash charge, it reduces taxable income, and the tax thereby saved is real cash the business retains. In an after-tax cash-flow analysis of a project, the depreciation of any asset the project uses generates a yearly tax saving equal to the depreciation times the tax rate, and that saving is added to the project cash flows.

Because money received sooner is worth more, an accelerated method or MACRS, by taking larger deductions early, raises the present value of the tax shield and so improves a project net present value compared with straight-line, even though the total depreciation over the asset life is the same.

This is the link between depreciation and the net present value and internal rate of return tools in this silo: the depreciation schedule this calculator produces is exactly the input those analyses need to compute the tax shield accurately.

Depreciation systems around the world

While the mathematics of the methods is universal, the rules that govern which method and rates you may use for tax differ by country. In the United States, MACRS is prescribed for tax, while financial reporting under US GAAP typically uses straight-line or an accelerated method. In Mexico, the tax authority, the SAT, sets maximum annual depreciation percentages by type of asset that businesses apply for tax purposes.

In Brazil, the Receita Federal publishes depreciation rates and useful lives, while accounting follows CPC 27, the standard aligned with international practice, which permits straight-line, declining balance, and units of production. International Financial Reporting Standards, used in much of the world, require the method to reflect the pattern in which the asset benefits are consumed and do not mandate a single approach.

The general methods in this calculator underlie all these systems; where a local tax regime prescribes specific rates, use those for the tax schedule while the calculator remains ideal for financial-reporting methods and for understanding how each approach behaves.

Selling or disposing of a depreciated asset

Depreciation does not end the story of an asset; what happens when you sell or scrap it depends on how the sale price compares with the book value at that moment. If you sell the asset for exactly its book value, there is no gain or loss and nothing further to record beyond removing the asset and its accumulated depreciation from the books. If you sell for more than book value, the excess is a gain, and if you sell for less, the shortfall is a loss, each recognised in the accounts in the year of sale.

Because accelerated methods drive book value down faster, an asset depreciated by double declining balance or MACRS will often have a low book value part way through its life, so an ordinary sale price can produce an accounting gain simply because depreciation ran ahead of the real decline in value.

For tax, this is where depreciation recapture arises: a gain up to the amount of depreciation previously taken is often taxed as ordinary income rather than as a capital gain, which is a deliberate reversal of the earlier deductions.

The practical point for anyone using a depreciation schedule is that the book value it reports at any year is the reference point for a disposal decision, not a prediction of the sale price. The two can differ substantially, especially under accelerated methods, and the difference has real accounting and tax consequences. The calculator gives you the book value at the end of every year, which is exactly the figure you would compare against a prospective sale price to work out the gain or loss on disposal.

A related timing question is the partial year. Assets are rarely bought on the first day of a financial year, so the first and last years often carry only a fraction of a full year of depreciation. Financial reporting handles this with a convention such as pro-rating by the number of months the asset was held, while MACRS builds a half-year convention directly into its tables, assuming every asset is placed in service at mid-year.

This calculator computes full-year figures for the general methods, which is the standard teaching form and the right basis for comparing methods; where a partial first year applies in practice, pro-rate the first year and shift the remainder accordingly, and for United States tax rely on the MACRS tables, which already embed the convention.

The essential idea is that the total depreciation over the asset life is unchanged by the convention; only its distribution across the first and last years shifts, so a full-year schedule remains the right tool for understanding and comparing how each method behaves. Once you know the annual pattern, applying a first-year fraction is a small final adjustment rather than a change to the underlying method.

How depreciation appears in the financial statements

Depreciation shows up in two places in the accounts, and seeing how they connect makes the schedule easier to interpret. On the income statement, the depreciation expense for the year reduces profit, sitting among the operating costs; it is the annual figure the calculator reports for each year.

On the balance sheet, the asset is shown at its original cost less the accumulated depreciation, a running total that grows each year, and the difference is the book value, sometimes called the carrying amount. So the same schedule feeds both statements: the year column is the expense that hits the income statement, and the accumulated and book-value columns are what appears on the balance sheet.

Because depreciation lowers reported profit without any cash leaving the business, cash-flow statements add it back to profit when reconciling to operating cash flow, which is a frequent point of confusion for newcomers: profit falls, but cash does not, precisely because depreciation is a non-cash charge.

This dual role is why depreciation is more than a bookkeeping formality. It shapes the profit a business reports, the value of the assets it shows, and, through the tax it saves, the cash it keeps. A manager reading the accounts should know which method is in use, because two otherwise identical businesses can report different profits and asset values purely from choosing straight-line versus an accelerated method. The calculator schedule gives you exactly the numbers that would flow into each statement, so you can see the effect of a method choice before it reaches the books.

A worked comparison across methods

The clearest way to see how the methods differ is to run the same asset through each. Take a machine costing fifty thousand with a salvage value of five thousand and a five-year life. Under straight-line the depreciation is a flat nine thousand every year, so the book value steps down evenly from fifty thousand to five thousand.

Under double declining balance the first-year charge is forty percent of fifty thousand, or twenty thousand, then twelve thousand, then seven thousand two hundred, with the method switching to straight-line and flooring at salvage in the last two years so it still ends at five thousand. Under sum-of-years-digits the charges are fifteen thousand, twelve thousand, nine thousand, six thousand, and three thousand, also ending exactly at salvage.

If the same fifty thousand asset were placed in the MACRS five-year class instead, salvage would be ignored and the charges would be ten thousand, sixteen thousand, nine thousand six hundred, five thousand seven hundred sixty, five thousand seven hundred sixty, and two thousand eight hundred eighty across six tax years, depreciating the whole cost to zero.

The totals tell the story. Straight-line, double declining balance, and sum-of-years-digits all write off the same forty-five thousand of depreciable cost over the life, but they distribute it very differently: the accelerated methods put far more in the early years. MACRS writes off the full fifty thousand because it ignores salvage. The choice of method therefore changes the timing of the expense and, through tax, the timing of the cash benefit, even when the total depreciation is identical. The calculator lets you switch between these methods on the same inputs to see the contrast for your own asset.

Estimating useful life and salvage value

Two inputs shape every depreciation schedule and both are estimates that deserve thought: the useful life and the salvage value. Useful life is the period over which the asset is expected to be economically usable to your business, which is not always the same as its physical life; a machine might run for twenty years but be economically obsolete in eight, and the useful life should reflect that.

Guidance comes from manufacturer data, industry norms, past experience with similar assets, and, for tax, the recovery periods or rates the authorities prescribe. Salvage value is your estimate of the amount the asset will be worth at the end of that life, whether as a resale price or scrap value, net of any disposal cost. For many assets salvage is small relative to cost and is sometimes taken as zero for simplicity, which slightly increases the annual depreciation.

Because both figures are forecasts, it is worth revisiting them if circumstances change, and worth remembering that MACRS sidesteps the salvage estimate entirely by ignoring it.

Getting these estimates roughly right matters more than getting the method exactly right, because they set the total amount to be depreciated and the number of years over which it is spread. A conservative, defensible useful life and a realistic salvage value give a schedule that reflects reality and stands up to scrutiny, whereas optimistic assumptions can distort profit and, if used for tax, invite challenge.

Depreciation, amortisation, and depletion

Depreciation belongs to a family of three related concepts that allocate the cost of long-lived resources over time, and it helps to keep them distinct. Depreciation applies to tangible fixed assets, physical things such as machines, vehicles, and buildings, that wear out or become obsolete over a finite life. Amortisation applies the same idea to intangible assets, such as patents, licences, and software, spreading their cost over their useful or legal life, usually by the straight-line method.

Depletion applies to natural resources, such as mines, oil wells, and timber, allocating their cost as the resource is extracted, in a way that closely resembles the units-of-production method of depreciation. Land is neither depreciated nor depleted, because it does not wear out, though the resources on it may be.

The methods in this calculator are depreciation methods, but the straight-line and units-of-production logic transfers directly to amortisation and depletion respectively, so understanding depreciation gives you the other two almost for free.

Common mistakes to avoid

Several errors recur with depreciation. The first is including salvage value in a MACRS calculation; MACRS ignores salvage and depreciates to zero, so subtracting salvage first understates the deductions. The second is forgetting the half-year convention in MACRS, which is why a five-year class spans six years; the tables already build this in, so use them rather than a plain formula.

The third is applying the declining-balance rate to the depreciable cost instead of to the book value; the rate must be applied to the falling book value, and depreciation must be floored at salvage. The fourth is depreciating an asset below its salvage value under the general methods, which should never happen. And the fifth is confusing book value with market value; book value is an accounting figure driven by the method chosen and need not equal what the asset would actually fetch if sold.

The calculator handles the conventions correctly, but understanding them helps you interpret the schedule and avoid these traps.

Five worked examples of depreciation

Example 1: straight-line

An asset costs 50,000, salvage 5,000, life 5 years. Straight-line = (50,000 − 5,000) ÷ 5 = 9,000 a year, every year. The book value falls in equal steps to the 5,000 salvage.

Example 2: double-declining balance, year 1

DDB rate = 2 ÷ 5 = 40%. Year 1 = 40% × 50,000 = 20,000. Year 2 = 40% × (50,000 − 20,000) = 12,000. DDB front-loads depreciation and ignores salvage until book value nears it.

Example 3: sum-of-years’-digits

SYD denominator = 1+2+3+4+5 = 15. Year 1 = 5/15 × (50,000 − 5,000) = 15,000; year 2 = 4/15 × 45,000 = 12,000. Another accelerated pattern, smoother than DDB.

Example 4: units of production

If the asset makes 90,000 units over its life and 20,000 this year, depreciation = (45,000 depreciable ÷ 90,000) × 20,000 = 10,000. Expense follows actual usage, not time.

Example 5: book value over time

Under straight-line, after 3 years book value = 50,000 − 3 × 9,000 = 23,000. Book value is always cost minus accumulated depreciation, and never drops below salvage.

Three expert tips for choosing a method

Match the method to the usage pattern

Use accelerated methods (DDB, SYD) for assets that lose value or productivity fast early on, straight-line for steady wear, and units-of-production for usage-driven assets.

Separate tax books from financial books

Tax depreciation (such as MACRS) often differs from the method used for financial reporting. Keep them distinct — the calculator’s schedule is a model, not a tax filing.

Never depreciate below salvage

Straight-line and SYD build salvage in, but DDB can overshoot; switch to straight-line for the remaining life once DDB would take book value under salvage.

Frequently asked questions

Sources, disclaimer and editorial transparency

Method follows the standard treatment of depreciation in engineering economy and accounting, including the texts by Blank and Tarquin, Newnan, and Park, and the MACRS half-year percentage tables from IRS Publication 946. See our Editorial Policy for how we research and review each tool.

This calculator is for education and planning and does not constitute financial, tax, or accounting advice. Tax depreciation rules vary by country and situation; confirm any figure that informs a real tax filing with a qualified professional. OpsCalculators is operated by MAFHH INTERNATIONAL LTD; see our Privacy Policy.