Calculate the annual straight-line depreciation expense and book value of an asset over its useful life.
A depreciation calculator estimates how much value an asset loses each year over its useful life, using the straight-line depreciation method — the simplest and most common approach. It also tracks the asset's "book value" (its value on the books after accounting for depreciation) year by year, down to its salvage value at the end of its useful life.
Straight-line depreciation spreads the depreciable amount (cost minus salvage value) evenly across each year of the asset's useful life, so the same dollar amount is depreciated every year.
Formula: Annual Depreciation = (Asset Cost − Salvage Value) ÷ Useful Life (years). Book Value at End of Year = Asset Cost − (Annual Depreciation × Number of Years Elapsed), down to a minimum of the salvage value.
Example: For a $50,000 asset with a $5,000 salvage value and a 10-year useful life, the annual depreciation is ($50,000 − $5,000) ÷ 10 = $4,500 per year, and the book value declines by $4,500 each year until it reaches $5,000 at the end of year 10. (Note: all figures in this example are for illustration purposes only.)
Depreciation is an accounting concept that spreads the cost of a long-lived asset (like equipment, vehicles, or buildings) over its useful life, rather than expensing the entire cost in the year of purchase — this better matches the expense to the periods the asset generates value. Straight-line depreciation is the simplest method and commonly used for financial reporting, but US tax law allows other methods, such as MACRS (Modified Accelerated Cost Recovery System), which often allows for faster depreciation (larger deductions in earlier years) for tax purposes. The useful life and depreciation method used for tax purposes may differ from what's used for financial statements — this calculator illustrates the straight-line method only, which is a common starting point but may not match your actual tax depreciation schedule (example method used in this calculator — consult a tax professional for tax depreciation).
Straight-line depreciation spreads the depreciable cost of an asset (its cost minus salvage value) evenly across each year of its useful life, resulting in the same depreciation expense every year. It's the simplest and most common depreciation method.
Salvage value is the estimated value of an asset at the end of its useful life — what you could sell it for, or scrap value. If an asset will be worthless when retired, salvage value would be 0.
Not always. While straight-line is common for financial reporting, US tax law often allows accelerated depreciation methods like MACRS, which front-load larger deductions in earlier years. Tax depreciation schedules can differ significantly from straight-line — consult a tax professional.
Useful life is often estimated based on how long the asset is expected to remain productive for your business, industry conventions, or IRS guidelines for specific asset categories (for tax depreciation purposes). The useful life used for financial reporting and tax purposes may differ.
Not necessarily. Book value is an accounting concept based on the depreciation schedule, which may not match what the asset could actually be sold for on the market — actual resale values depend on condition, demand, and other factors not captured by depreciation schedules.
No. Under straight-line depreciation, the book value is capped at the salvage value — once the asset's book value reaches its salvage value, no further depreciation is recorded even if the useful life isn't fully elapsed in the calculation.
Disclaimer: The information and figures provided on this page are for educational and illustrative purposes only and represent straight-line depreciation, which may not match the depreciation method or schedule appropriate for tax purposes. Tax depreciation rules change periodically. Always consult a qualified accountant or tax professional before making any business accounting or tax decisions.