Depreciation on $10,000 over 20 years
Full straight-line depreciation schedule for an asset costing $10,000 over 20 years. Adjust any field below, including the method, to try your own numbers.
Total Depreciation
$9,000
First-Year Expense
$450
Avg. Annual Expense
$450
Example
A $10,000 asset with a $1,000 salvage value depreciated over 20 years using the straight-line method loses $9,000 in total value, or about $450 in year one.
Asset cost split between depreciable amount and salvage value
- Depreciable Amount: $9,000
- Salvage Value: $1,000
What is a Depreciation Calculator?
A depreciation calculator estimates how much value a physical asset — equipment, a vehicle, a building, machinery — loses each year over its useful life. Businesses use this figure to spread the cost of an asset across the years it actually helps generate revenue, rather than expensing the full purchase price the moment it is bought.
This calculator supports the three most common methods: straight-line (equal expense every year), declining balance (faster expense early, slower later), and sum-of-the-years'-digits (also front-loaded, but with a different weighting curve). All three methods depreciate the same total amount — the asset cost minus its salvage value — they just differ in timing.
Book Value Over Time
This chart plots the asset's book value at the end of each year, based on your selected depreciation method — a straight line for straight-line depreciation, or a curve that flattens out for the accelerated methods.
Year-by-Year Depreciation Schedule
Every row shows the asset's book value at the start of the year, the depreciation expense recognized that year, the running accumulated depreciation, and the resulting ending book value.
| Year | Beginning Value | Depreciation | Accumulated | Ending Value |
|---|---|---|---|---|
| 1 | $10,000 | $450 | $450 | $9,550 |
| 2 | $9,550 | $450 | $900 | $9,100 |
| 3 | $9,100 | $450 | $1,350 | $8,650 |
| 4 | $8,650 | $450 | $1,800 | $8,200 |
| 5 | $8,200 | $450 | $2,250 | $7,750 |
| 6 | $7,750 | $450 | $2,700 | $7,300 |
| 7 | $7,300 | $450 | $3,150 | $6,850 |
| 8 | $6,850 | $450 | $3,600 | $6,400 |
| 9 | $6,400 | $450 | $4,050 | $5,950 |
| 10 | $5,950 | $450 | $4,500 | $5,500 |
| 11 | $5,500 | $450 | $4,950 | $5,050 |
| 12 | $5,050 | $450 | $5,400 | $4,600 |
| 13 | $4,600 | $450 | $5,850 | $4,150 |
| 14 | $4,150 | $450 | $6,300 | $3,700 |
| 15 | $3,700 | $450 | $6,750 | $3,250 |
| 16 | $3,250 | $450 | $7,200 | $2,800 |
| 17 | $2,800 | $450 | $7,650 | $2,350 |
| 18 | $2,350 | $450 | $8,100 | $1,900 |
| 19 | $1,900 | $450 | $8,550 | $1,450 |
| 20 | $1,450 | $450 | $9,000 | $1,000 |
Depreciation Formulas
Straight-line spreads the depreciable amount evenly across every year of useful life:
Declining balance applies a fixed rate to the asset's remaining book value each year, so the expense shrinks over time:
Sum-of-the-years'-digits weights early years more heavily using a shrinking fraction:
Straight-Line vs. Accelerated Depreciation
Straight-line depreciation is the simplest and most widely used method for financial reporting because it produces a predictable, level expense every year. Accelerated methods — declining balance and sum-of-the-years'-digits — deliberately front-load the expense, recognizing more depreciation in the earlier years when many assets (vehicles, computers, machinery) actually lose the most real-world value and are most productive.
All three methods eventually depreciate the exact same total amount — the difference is purely timing. A business choosing an accelerated method reports lower profit (and often lower tax liability) in the early years and higher profit in later years, compared to straight-line.
Why Salvage Value Matters
Salvage value (also called residual value) is the estimated amount the asset could be sold for once it reaches the end of its useful life — scrap metal value for machinery, or resale value for a vehicle. Depreciation only ever reduces the book value down to the salvage value, never below it, because the business still expects to recover at least that much when the asset is retired or sold.
Book Value vs. Market Value
Book value — what this calculator tracks — is an accounting figure: original cost minus accumulated depreciation. It does not necessarily match what the asset would actually sell for on the open market (its fair market value). A well-maintained vehicle might have a higher market value than its book value late in its depreciation schedule, while a piece of obsolete technology might be worth less than its book value even in year one.
Example — Your Current Inputs
A $10,000 asset with a $1,000 salvage value depreciated over 20 years using the straight-line method loses $9,000 in total value, or about $450 in year one.
Additional Example — Delivery Van
A small business buys a delivery van for $32,000, expects to use it for 6 years, and estimates a $5,000 salvage value at trade-in. Under straight-line depreciation, the annual expense is ($32,000 − $5,000) ÷ 6 = $4,500 per year. Under double-declining balance (factor 2), the rate is 2 ÷ 6 = 33.3%, so year one's expense is $32,000 × 33.3% ≈ $10,667 — more than double the straight-line figure — with the expense shrinking each subsequent year.
About These Parameters
- Asset Cost
- The full amount paid to acquire and prepare the asset for use, including the purchase price plus any delivery, installation, or setup costs that were required before the asset could be put into service. This is the starting book value.
- Salvage Value
- Your best estimate of what the asset will be worth — for resale, trade-in, or scrap — at the end of its useful life. This is often estimated as a percentage of the original cost (commonly 10–20%) but can be $0 for assets with no meaningful residual value.
- Useful Life
- The number of years the asset is expected to remain productive. For tax purposes in the US, the IRS publishes standard useful-life classes (e.g., 5 years for computers and vehicles, 7 years for office furniture, 27.5 years for residential rental buildings), but for internal planning you can use your own realistic estimate.
- Balance Factor (Declining Balance Only)
- The acceleration multiplier applied to the straight-line rate. A factor of 2 is "double declining balance," the most common variant; 1.5 is a milder acceleration sometimes used when a business wants front-loaded expense without doubling the rate.
Frequently Asked Questions
Which depreciation method should I use?
Straight-line is the standard choice for financial statements because it is simple and predictable. Accelerated methods (declining balance, sum-of-the-years'-digits) are often used for tax purposes or for assets that genuinely lose more value or usefulness early on, such as vehicles and technology. Many businesses use straight-line for reporting to shareholders and an accelerated method for tax filings — check with an accountant for your specific situation, since tax rules (like MACRS in the US) have their own prescribed schedules.
Does depreciation affect my cash flow?
No — depreciation is a non-cash accounting expense. The cash left your business when you originally purchased the asset. Depreciation simply spreads that already-spent cost across the accounting periods that benefit from using the asset, which affects reported profit and taxable income, but not the actual cash in your bank account.
What happens when an asset is fully depreciated?
Once accumulated depreciation reaches the depreciable amount (cost minus salvage value), the asset's book value equals its salvage value and depreciation stops — even if the business keeps using the asset. If the asset is later sold for more than its book value, the difference is typically recorded as a taxable gain.
Can salvage value be zero?
Yes. Many assets — specialized equipment, software, leasehold improvements — have no realistic resale value at the end of their useful life, so a $0 salvage value is common and simply means the full asset cost is depreciated over its useful life.