Asset Depreciation Calculator
Compute annual depreciation for any asset using either straight-line or double-declining balance methods. Use it for tax filings, financial statements, or capital budgeting.
About this calculator
Depreciation allocates an asset's cost over its useful life, matching expenses to the periods in which the asset generates revenue. Two common methods are supported. Straight-line: Annual Depreciation = (Asset Cost − Salvage Value) / Useful Life. This spreads equal expense each year and is simplest for accounting purposes. Double-declining balance (DDB): Depreciation in Year N = Asset Cost × (1 − 2/Useful Life)^(N−1) × (2/Useful Life). DDB accelerates deductions—charging more in early years when the asset is most productive and loses value fastest. The DDB rate is exactly twice the straight-line rate. Both methods stop depreciating once book value reaches salvage value. Businesses choose between methods based on tax strategy, asset type, and reporting preferences; accelerating depreciation improves early-year cash flow by deferring taxes.
How to use
An asset costs $10,000, has a $1,000 salvage value, a 5-year useful life, and you want to compare Year 2 depreciation under both methods. Straight-line: ($10,000 − $1,000) / 5 = $9,000 / 5 = $1,800 per year—identical every year. Double-declining balance for Year 2: DDB rate = 2 / 5 = 40%. Book value at start of Year 2 = $10,000 × (1 − 0.40)^(2−1) = $10,000 × 0.60 = $6,000. Year 2 depreciation = $6,000 × 0.40 = $2,400. DDB produces $600 more in deductions in Year 2, reducing taxable income earlier in the asset's life.
Frequently asked questions
When should I choose straight-line depreciation over double-declining balance?
Straight-line depreciation is preferred when an asset loses value evenly over time—think office furniture, buildings, or long-lived equipment with predictable use. It is also the simpler method to explain to stakeholders and is required by some regulatory frameworks for specific asset classes. Double-declining balance suits assets that are most productive and lose value rapidly in early years, such as technology hardware, vehicles, or machinery subject to obsolescence. From a tax perspective, DDB is advantageous when you want to maximize deductions early and your business expects higher taxable income in the near term.
What is salvage value and how does it affect depreciation calculations?
Salvage value (also called residual value) is the estimated amount an asset will be worth at the end of its useful life—what you could sell it for as scrap or on the secondary market. Under straight-line depreciation, only the depreciable base (Cost − Salvage Value) is expensed, so a higher salvage value directly reduces annual depreciation. Under the double-declining balance method, salvage value does not directly enter the annual formula, but depreciation must stop once book value reaches the salvage value to avoid over-depreciating the asset. Accurate salvage value estimates are important because they affect both reported profit and tax liability across multiple years.
How does accelerated depreciation like double-declining balance affect cash flow?
Accelerated depreciation does not directly change the cash you spend—you paid for the asset on day one. What it changes is when you claim the tax deduction. By front-loading depreciation, you reduce taxable income more in early years, which defers tax payments to later years. This deferral is economically valuable because a dollar saved in taxes today is worth more than a dollar saved five years from now (time value of money). For capital-intensive businesses investing heavily in equipment, accelerated depreciation can meaningfully improve operating cash flow in the years immediately following asset purchase, freeing capital for reinvestment.