Asset Depreciation Calculator
Calculate annual depreciation expense for any business asset using straight-line or double-declining-balance methods. Use it when filing taxes, preparing financial statements, or deciding how to expense new equipment.
About this calculator
Depreciation spreads the cost of a long-lived asset over its useful life, matching expenses to the revenue they help generate. Under the straight-line method, annual depreciation is constant: Depreciation = (Asset Cost − Salvage Value) / Useful Life. This is simple and predictable, making it ideal for assets that wear evenly. The double-declining-balance (DDB) method accelerates depreciation: Year 1 Depreciation = Asset Cost × (2 / Useful Life). In subsequent years the same rate applies to the remaining book value, so expense is front-loaded. Accelerated depreciation reduces taxable income more in early years, benefiting cash flow. The salvage value is the estimated residual value at end of life; under DDB, the book value cannot fall below the salvage value.
How to use
Example using straight-line: A piece of equipment costs $20,000, has a salvage value of $2,000, and a useful life of 6 years. Annual Depreciation = (20,000 − 2,000) / 6 = 18,000 / 6 = $3,000 per year. Now using DDB on the same asset: Year 1 = 20,000 × (2/6) = 20,000 × 0.3333 ≈ $6,667. Year 2 book value = 20,000 − 6,667 = $13,333; Year 2 depreciation = 13,333 × 0.3333 ≈ $4,444. Depreciation continues until book value reaches the $2,000 salvage floor.
Frequently asked questions
What is the difference between straight-line and double-declining-balance depreciation methods?
Straight-line depreciation spreads the depreciable cost evenly across each year of useful life, producing the same expense every period. Double-declining-balance (DDB) applies twice the straight-line rate to the asset's remaining book value, front-loading depreciation into earlier years. DDB results in higher deductions early on, reducing taxable income sooner and improving near-term cash flow. Straight-line is simpler and preferred for assets whose economic benefit is consumed evenly, such as buildings.
How does salvage value affect the depreciation calculation for a business asset?
Salvage value (also called residual value) is the estimated amount the asset will be worth at the end of its useful life. Under straight-line depreciation, only the depreciable base — cost minus salvage value — is spread across the useful life, so a higher salvage value directly reduces annual expense. Under the DDB method, the asset cannot be depreciated below its salvage value, which caps the total depreciation taken. Estimating salvage value accurately is important because an inflated estimate understates expenses and overstates profits.
When should a business choose accelerated depreciation over straight-line depreciation?
Businesses should consider accelerated depreciation when they want to maximize tax deductions in the early years of an asset's life, improving near-term cash flow. It also makes sense for assets that lose value quickly — such as computers or vehicles — because the expense pattern better matches economic reality. However, accelerated depreciation front-loads expenses and reduces reported net income in early years, which can affect loan covenants or investor perception. Always consult a tax professional to align the method with both IRS rules and your business strategy.