Which depreciation method is best?

They all depreciate the same total — cost minus salvage — so the choice is about timing and truthfulness. Straight line fits assets that wear evenly. Declining balance (especially double declining) fits assets that lose usefulness or resale value fastest when new, like vehicles and computers. Sum-of-the-years'-digits accelerates too, but more gently and with a guaranteed landing on salvage value. Match the method to how the asset actually ages, and to the rules your tax authority prescribes.

How do I get double declining balance?

Choose Declining Balance and set the depreciation factor to 2. The annual rate becomes 2 ÷ useful life, applied to the book value (not to cost minus salvage). Depreciation stops when the book value reaches the salvage value.

Why does a partial first year add an extra row?

Because the asset's service years and your accounting years are offset. If only 2.5/12 of the first service year falls inside the first accounting year, the remaining 9.5/12 of that service year's depreciation lands in the next accounting year — and the spillover pushes a tail of the final service year into one more accounting year. Same total, sliced by the calendar.

Is salvage value always subtracted?

For straight line and SYD, yes: only cost minus salvage is ever depreciated. For declining balance, salvage is not subtracted in the yearly formula — instead it acts as a floor the book value may not fall below. Either way, the total depreciation over the life equals cost minus salvage.

Depreciation Calculator — Straight Line, Declining Balance, SYD

Depreciation: Spreading a Cost Across a Life

An asset wears out, gets used up, or simply becomes obsolete — depreciation is how accounting spreads its cost across the years it serves, instead of dumping the whole purchase into one year's results. A machine expensed on day one would make its purchase year look disastrous and every later year look free; depreciation matches the cost to the periods that benefit. In the U.S. and most other systems the charge is tax-deductible, which is why the choice of method — pure timing, never total — still matters: accelerated methods pull deductions earlier, flattering later profits and deferring tax.

The Three Methods

Straight line — the default everywhere: (Cost − Salvage) ÷ Useful Life, the same charge every year. Simple, predictable, and right for assets that serve evenly. Declining balance — a fixed rate (factor ÷ life; factor 2 is the famous double declining) applied each year to the book value, so charges shrink as the asset ages. Salvage is not subtracted up front; it is the floor the book value stops at. Best for vehicles, computers and anything worth much less the moment it's used. Sum of the years' digits — the depreciable base is multiplied by a falling fraction: year k takes (life − k + 1) ÷ (1 + 2 + … + life) of the base. Accelerated like declining balance, but smoother and arithmetically guaranteed to land exactly on salvage. A fourth family, units of production, ties the charge to actual output instead of time — right for machinery whose wear is measured in cycles, and outside this calculator's scope. For U.S. tax filing, note that the IRS's MACRS system prescribes its own lives and conventions (often 200% declining with a switch to straight line); this calculator gives the underlying schedules the accounting is built from.

Partial Years and Conventions

Assets rarely enter service on the first day of an accounting year, so the first service year straddles two accounting years. Conventions decide how much of it counts in year one: count every day is exact; half-month treats the starting month as half used; full-month credits the whole starting month; half/full-quarter do the same by quarters; half-year simply books half a year regardless of the date. Whichever you choose, the leftover slice of the first service year pushes through the schedule and a tail lands in one extra accounting year — the total never changes.

Salvage Value

Salvage (residual, scrap) value is what the asset should be worth at the end of its useful life — saleable parts, trade-in, scrap metal. Only the excess of cost over salvage is ever depreciated; an asset expected to be worthless at the end depreciates its full cost. Estimates matter: overstate salvage and the books carry a value the asset will never realize; understate it and early years absorb charges that belong later.

Frequently Asked Questions

Why is year 1 so different between methods?

Because acceleration is the point: double declining front-loads $4,400 of the $10,000 into year 1 at the defaults, straight line spreads $2,000 evenly. Reported profit in year 1 differs by $2,400 with identical economics.

Does declining balance ever reach salvage exactly?

A pure percentage never quite lands, so the final year is capped: depreciation stops the moment book value would cross salvage, and the last charge is exactly the distance remaining.

Book depreciation or tax depreciation?

Often both, on different schedules — companies keep one set of books for reporting and follow the tax authority's prescribed system (like MACRS) for the return. This calculator produces the general accounting schedules.

Depreciation Calculator