Depreciation Calculator

Understanding Asset Value Decline

Assets lose value over time through use, obsolescence, and wear. Depreciation quantifies this decline—essential for financial statements, tax deductions, and understanding true costs of ownership. The calculator models different depreciation methods, showing annual expense and remaining book value.

For businesses, depreciation represents a significant tax deduction. For individuals, understanding depreciation reveals the true cost of vehicles, equipment, and other assets. The calculator makes these concepts accessible.

Everything you buy starts losing value.

Why Depreciation Matters

Depreciation serves multiple purposes:

Accounting: Matches asset cost to periods benefited Taxation: Provides deductions reducing taxable income Planning: Shows true cost of asset ownership Budgeting: Anticipates replacement timing

Straight-Line Depreciation

The simplest method spreads cost evenly:

Annual Depreciation = (Cost - Salvage Value) / Useful Life

$50,000 equipment, $5,000 salvage, 10-year life: Annual depreciation = ($50,000 - $5,000) / 10 = $4,500/year

Book value declines by $4,500 each year.

Declining Balance Depreciation

Accelerated method with higher early depreciation:

Higher deductions early, lower later.

Double Declining Balance

Most aggressive standard method—double the straight-line rate:

Straight-line rate: 1/10 = 10% Double declining: 20%

Applied to declining book value, this front-loads depreciation significantly.

MACRS for Tax Purposes

Modified Accelerated Cost Recovery System is the standard US tax depreciation:

MACRS uses prescribed percentages by year.

Vehicle Depreciation

Vehicles depreciate rapidly:

New car purchased at $40,000:

• Year 1: Loses ~20% ($8,000) → $32,000
• Year 3: Worth ~60% ($24,000)
• Year 5: Worth ~40% ($16,000)
• Year 10: Worth ~20% ($8,000)

Understanding this helps with buy vs. lease decisions.

Real Estate Depreciation

Rental property depreciation provides tax benefits:

$300,000 rental property (building value only, not land): 27.5-year residential depreciation: Annual deduction = $300,000 / 27.5 = $10,909

This paper loss reduces taxable rental income.

Section 179 Deduction

Section 179 allows immediate expensing of qualifying assets:

$100,000 equipment purchase:

• Regular depreciation: Spread over 5-7 years
• Section 179: Deduct full amount in purchase year (subject to limits)

Powerful tax planning tool for business equipment purchases.

Bonus Depreciation

Additional first-year depreciation beyond regular methods:

Allows 60-80% (varies by year) first-year deduction Applies after Section 179 limits reached Phases down over coming years

Combines with other methods for maximum deductions.

Book Value vs. Market Value

Book value (cost minus accumulated depreciation) differs from market value (what someone would pay):

$50,000 equipment, 5 years depreciation at $4,500/year: Book value: $27,500 Market value: Might be $15,000 or $35,000 depending on condition and demand

Depreciation is accounting convention, not market reality.

Depreciation Recapture

Selling depreciated assets may trigger recapture tax:

If sold for more than book value, depreciation "recaptured" as ordinary income.

$27,500 book value equipment sold for $35,000: Recapture income: $7,500 (taxed as ordinary income)

Using the Calculator

Enter asset cost, salvage value, useful life, and depreciation method.

The calculator shows:

• Annual depreciation by year
• Accumulated depreciation
• Book value by year
• Comparison across methods
• Tax deduction schedule

Model scenarios: How does straight-line compare to declining balance? What's the MACRS schedule for this asset? When does book value reach salvage?

Use results to understand depreciation for accounting, tax planning, and cost analysis.

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Depreciation quantifies the inevitable decline in asset value over time. The calculator models different methods, showing annual expense allocations and remaining book values. For businesses, choosing the right method affects tax liability significantly. For individuals, understanding depreciation reveals true ownership costs. Assets depreciate whether you track it or not—tracking it enables smarter decisions.