Straight-Line Depreciation Calculator
Calculates the annual depreciation expense for an asset using the straight-line method. Ideal for accountants, business owners, and students preparing financial statements or tax schedules.
About this calculator
Straight-line depreciation spreads the cost of an asset evenly over its useful life, making it the simplest and most commonly used depreciation method in accounting. The formula is: Annual Depreciation = (Asset Cost − Salvage Value) / Useful Life. Asset cost is what you paid for the asset, salvage value is the estimated residual value at the end of its life, and useful life is the number of years the asset is expected to remain in service. The numerator (Cost − Salvage Value) is called the depreciable base. Each year, the same fixed amount is expensed on the income statement and deducted from the asset's book value on the balance sheet. This method is preferred when an asset generates benefits evenly over time, such as buildings, furniture, or office equipment. It is accepted under both GAAP and IFRS.
How to use
A company buys a piece of equipment for $50,000. It expects the equipment to last 8 years and have a salvage value of $2,000 at the end. Apply the formula: Annual Depreciation = ($50,000 − $2,000) / 8 = $48,000 / 8 = $6,000 per year. The company records $6,000 as depreciation expense each year for 8 years. After year 1, the book value is $50,000 − $6,000 = $44,000. After all 8 years, the book value equals the $2,000 salvage value.
Frequently asked questions
When should I use straight-line depreciation instead of declining balance depreciation?
Straight-line depreciation is best when an asset provides roughly equal economic benefit each year — think office furniture, buildings, or long-lived equipment with steady usage. Declining balance methods are better when an asset loses value faster in its early years, such as vehicles or computers that become obsolete quickly. Straight-line also produces smoother income statements, which can be advantageous for financial reporting. For tax purposes, accelerated methods like MACRS in the US often allow larger early deductions, so the choice depends on both reporting and tax strategy.
What happens if the salvage value of an asset is zero in straight-line depreciation?
If salvage value is zero, the entire asset cost becomes the depreciable base. The formula simplifies to: Annual Depreciation = Asset Cost / Useful Life. For example, a $30,000 asset with no salvage value over 5 years depreciates at $6,000 per year. A zero salvage value is common for assets like custom software or intangible assets that will have no resale value. Using zero when the actual residual value is non-zero overstates depreciation expense and understates book value.
How does straight-line depreciation affect taxes and financial statements?
On the income statement, annual depreciation is recorded as an operating expense, reducing taxable income and net profit. On the balance sheet, accumulated depreciation reduces the asset's book value each year until it reaches salvage value. Straight-line depreciation results in consistent annual expense charges, making earnings more predictable compared to accelerated methods. However, because it delays larger deductions to later years compared to accelerated methods, it may result in higher tax payments in early years, which is a key trade-off to discuss with your accountant.