{
  "id": "depreciation",
  "version": "a5d010174f01",
  "status": "published",
  "name": "Depreciation Calculator",
  "question": "What is the depreciation each year?",
  "summary": "Builds a yearly depreciation schedule by the straight-line, declining balance (double declining) or sum-of-the-years’ digits method from the cost, salvage value and useful life.",
  "category": "finance",
  "subcategory": "business",
  "url": "https://www.acalculator.org/finance/depreciation-calculator",
  "markdown": "https://www.acalculator.org/finance/depreciation-calculator.md",
  "kind": "schedule",
  "method": "Straight-line: (cost − salvage) ÷ life each year. Declining balance: book value × factor ÷ life, never below salvage, and the last year down to salvage. Sum of the years’ digits: (cost − salvage) × years left ÷ (life × (life + 1) ÷ 2).",
  "assumptions": [
    "Full years only: the asset is used from the start of year 1, with no part-year or mid-month convention.",
    "This is book (accounting) depreciation. US tax depreciation for most property uses MACRS tables, which are not included.",
    "Arithmetic is exact on the typed decimals; money shows to the cent and the rate to 2 decimals, halves up."
  ],
  "inputs": {
    "$schema": "https://json-schema.org/draft/2020-12/schema",
    "type": "object",
    "properties": {
      "cost": {
        "title": "Cost of the asset",
        "description": "What the asset cost, including shipping and setup to get it working.",
        "type": "number",
        "x-unit": "USD",
        "exclusiveMinimum": 0,
        "maximum": 1000000000000
      },
      "salvage": {
        "title": "Salvage value",
        "description": "What the asset will be worth at the end of its useful life.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000000
      },
      "life": {
        "title": "Useful life in years",
        "description": "How many years the asset will be used.",
        "type": "integer",
        "minimum": 1,
        "maximum": 50
      },
      "method": {
        "title": "Method",
        "description": "Straight-line (the same each year), declining balance (a percent of the book value), or sum-of-the-years’ digits.",
        "type": "string",
        "enum": [
          "straight",
          "declining",
          "syd"
        ]
      },
      "factor": {
        "title": "Declining balance factor",
        "description": "How fast the declining balance runs: 200% is double declining balance, 150% is 1.5 times.",
        "type": "number",
        "x-unit": "percent",
        "minimum": 100,
        "maximum": 400
      }
    }
  },
  "outputs": {
    "first": {
      "label": "Depreciation in year 1",
      "description": "The depreciation for the first year.",
      "format": "money"
    },
    "total": {
      "label": "Total depreciation",
      "description": "The cost minus the salvage value: what the whole schedule writes off.",
      "format": "money"
    },
    "rate": {
      "label": "Yearly rate",
      "description": "Straight-line: 100 ÷ life, a percent of the cost minus salvage. Declining balance: factor ÷ life, a percent of the book value. To 2 decimals, halves up. Not shown for sum of the years’ digits.",
      "format": "percent"
    },
    "last": {
      "label": "Book value at the end",
      "description": "The book value after the last year: the salvage value.",
      "format": "money"
    }
  },
  "defaultAnswer": {
    "inputs": {
      "cost": 58000,
      "salvage": 10000,
      "life": 5,
      "method": "straight",
      "factor": 200
    },
    "outputs": {
      "first": 9600,
      "total": 48000,
      "rate": 20,
      "last": 10000
    },
    "text": "A $58,000.00 asset with a $10,000.00 salvage value over 5 years depreciates $9,600.00 in year 1."
  },
  "examples": [
    {
      "given": {
        "cost": 58000,
        "salvage": 10000,
        "life": 5,
        "method": "straight"
      },
      "expect": {
        "first": 9600,
        "total": 48000,
        "rate": 20,
        "last": 10000
      },
      "source": "OpenStax, Principles of Financial Accounting, section 11.3, Kenzie Company printing press (https://openstax.org/books/principles-financial-accounting/pages/11-3-explain-and-apply-depreciation-methods-to-allocate-capitalized-costs): (58,000 − 10,000) ÷ 5 = 9,600 a year"
    },
    {
      "given": {
        "cost": 58000,
        "salvage": 10000,
        "life": 5,
        "method": "declining",
        "factor": 200
      },
      "expect": {
        "first": 23200,
        "rate": 40,
        "last": 10000
      },
      "source": "OpenStax, Principles of Financial Accounting, section 11.3, Kenzie Company printing press (https://openstax.org/books/principles-financial-accounting/pages/11-3-explain-and-apply-depreciation-methods-to-allocate-capitalized-costs): 58,000 × 40% = 23,200; the fourth year stops at the 10,000 salvage value"
    },
    {
      "given": {
        "cost": 100000,
        "salvage": 0,
        "life": 5,
        "method": "syd"
      },
      "expect": {
        "first": 33333.333333333336,
        "total": 100000,
        "last": 0
      },
      "source": "AccountingTools, \"Sum of the years’ digits depreciation\", Pensive Corporation example (https://www.accountingtools.com/articles/sum-of-the-years-digits-depreciation): 100,000 × 5 ÷ 15 = 33,333 (rounded there to the dollar)"
    },
    {
      "given": {
        "cost": 100000,
        "salvage": 10000,
        "life": 4,
        "method": "declining",
        "factor": 200
      },
      "expect": {
        "first": 50000,
        "rate": 50,
        "last": 10000
      },
      "source": "principlesofaccounting.com, chapter 10, \"Depreciation methods\": double-declining balance stops at the salvage value (https://www.principlesofaccounting.com/chapter-10/depreciation-methods/): 50,000, 25,000, 12,500, then 2,500 (not 6,250) in year 4"
    },
    {
      "given": {
        "cost": 1000,
        "salvage": 100,
        "life": 3,
        "method": "declining",
        "factor": 150
      },
      "expect": {
        "first": 500,
        "rate": 50,
        "last": 100
      },
      "source": "hand calculation in content.mdx: 1,000 × 150% ÷ 3 = 500; 500 × 50% = 250; the last year takes 250 − 100 = 150; principlesofaccounting.com, chapter 10, \"Depreciation methods\": double-declining balance stops at the salvage value (https://www.principlesofaccounting.com/chapter-10/depreciation-methods/)"
    }
  ],
  "sources": [
    "OpenStax, Principles of Financial Accounting, section 11.3 \"Explain and Apply Depreciation Methods to Allocate Capitalized Costs\" (Kenzie Company example). https://openstax.org/books/principles-financial-accounting/pages/11-3-explain-and-apply-depreciation-methods-to-allocate-capitalized-costs",
    "AccountingTools, \"Sum of the years’ digits depreciation\". https://www.accountingtools.com/articles/sum-of-the-years-digits-depreciation",
    "principlesofaccounting.com, chapter 10, \"Depreciation methods\". https://www.principlesofaccounting.com/chapter-10/depreciation-methods/",
    "Internal Revenue Service, Publication 946, How To Depreciate Property (tax depreciation, MACRS). https://www.irs.gov/publications/p946"
  ],
  "related": [
    "profit",
    "roi",
    "business-loan"
  ],
  "changelog": []
}