# What is the depreciation each year?

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.

- Page: https://www.acalculator.org/finance/depreciation-calculator
- JSON spec: https://www.acalculator.org/finance/depreciation-calculator.json
- Version: a5d010174f01

## Default answer

Example with the default inputs (Cost of the asset $58,000.00, Salvage value $10,000.00, Useful life in years 5, Method Straight-line): A $58,000.00 asset with a $10,000.00 salvage value over 5 years depreciates $9,600.00 in year 1.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| cost | Cost of the asset | What the asset cost, including shipping and setup to get it working. |
| salvage | Salvage value | What the asset will be worth at the end of its useful life. |
| life | Useful life in years | How many years the asset will be used. |
| method | Method | Straight-line (the same each year), declining balance (a percent of the book value), or sum-of-the-years’ digits. |
| factor | Declining balance factor | How fast the declining balance runs: 200% is double declining balance, 150% is 1.5 times. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| first | Depreciation in year 1 | The depreciation for the first year. |
| total | Total depreciation | The cost minus the salvage value: what the whole schedule writes off. |
| rate | Yearly rate | 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. |
| last | Book value at the end | The book value after the last year: the salvage value. |

## 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.

## Worked examples

1. cost = $58,000.00, salvage = $10,000.00, life = 5, method = straight gives first = $9,600.00, total = $48,000.00, rate = 20%, last = $10,000.00. 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.
2. cost = $58,000.00, salvage = $10,000.00, life = 5, method = declining, factor = 200% gives first = $23,200.00, rate = 40%, last = $10,000.00. 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.
3. cost = $100,000.00, salvage = $0.00, life = 5, method = syd gives first = $33,333.33, total = $100,000.00, last = $0.00. 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).
4. cost = $100,000.00, salvage = $10,000.00, life = 4, method = declining, factor = 200% gives first = $50,000.00, rate = 50%, last = $10,000.00. 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.
5. cost = $1,000.00, salvage = $100.00, life = 3, method = declining, factor = 150% gives first = $500.00, rate = 50%, last = $100.00. Source: Principlesofaccounting.com, chapter 10, "Depreciation methods": double-declining balance stops at the salvage value (https://www.principlesofaccounting.com/chapter-10/depreciation-methods/).

## FAQ

### How do I calculate straight-line depreciation?

Subtract the salvage value from the cost and divide by the useful life. A $58,000 printing press worth $10,000 after 5 years depreciates (58,000 − 10,000) ÷ 5 = $9,600 a year.

### How does double declining balance work?

Each year, multiply the book value at the start of the year by 2 ÷ the useful life. For a 5-year life that is 40%: $58,000 × 40% = $23,200 in year 1, then 40% of the $34,800 left, and so on. Depreciation stops when the book value reaches the salvage value.

### What is sum-of-the-years’ digits?

Add the year numbers of the life (5 + 4 + 3 + 2 + 1 = 15 for 5 years). Year 1 takes 5/15 of the cost minus salvage, year 2 takes 4/15, down to 1/15 in the last year. $100,000 with no salvage gives $33,333.33 in year 1.

### Which method should I use?

Straight-line spreads the cost evenly and is the simplest. Declining balance and sum-of-the-years’ digits write off more in the early years, which suits assets that lose value fast or are used most when new. Your accountant or your company’s policy decides for your books.

### Is this the depreciation I claim on my taxes?

Usually not. US tax depreciation for most business property uses MACRS, with IRS tables, recovery periods and conventions such as the half-year convention. This calculator shows book depreciation by the three classic methods. See IRS Publication 946 for tax depreciation.

### What is book value?

The cost minus all the depreciation so far. At the end of the useful life it equals the salvage value.

### What if the salvage value is more than the cost?

There is nothing to depreciate, and the calculator gives a message instead of a schedule. A salvage value equal to the cost gives $0 every year.

## 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