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Depreciation Calculator

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Calculate straight-line depreciation for a business asset - the most common method for spreading an asset's cost over its useful life.

Depreciation Calculator

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Annual depreciation
$4,500.00
Monthly depreciation
$375.00
Depreciation rate
10% / year
Uses the straight-line method - equal depreciation each year over the asset's useful life.

The formula

Annual depreciation = (Asset cost - Salvage value) / Useful life (years)
Example

A $50,000 asset with a $5,000 salvage value and a 10-year useful life: (50,000-5,000)/10 = $4,500 per year, or $375 per month, until the asset reaches its $5,000 salvage value.

Step-by-step guide

  1. Enter the asset's original cost - the full purchase price, including installation if applicable.
  2. Estimate its salvage value - what it will likely be worth (or cost to dispose of) at the end of its useful life.
  3. Enter its useful life in years - based on how long the asset is expected to remain productive, not necessarily how long it physically lasts.

Why depreciation matters for a business

Depreciation spreads a large asset purchase's cost across the years it actually helps generate revenue, rather than expensing the whole amount the moment it's bought - this gives a more accurate picture of profitability each year and is a standard accounting practice. It's also frequently relevant for tax purposes, since many jurisdictions allow depreciation as a deductible expense, though tax depreciation rules and methods (which often differ from the straight-line method used for internal accounting) vary significantly and change periodically.

Note: This calculates straight-line depreciation for planning and accounting purposes. Tax depreciation often follows different rules and schedules (like MACRS in the US) - consult a tax professional or accountant for depreciation used on an actual tax return.

Common mistakes

Forgetting to subtract salvage value before dividing by useful life - depreciating the full cost to zero overstates the expense if the asset will still have real value at the end of its life.
Assuming book value (cost minus accumulated depreciation) equals the asset's actual resale value - the two often diverge significantly, especially for equipment that holds value unusually well or poorly.

Frequently asked questions

What's the difference between straight-line and accelerated depreciation?

Straight-line spreads the expense evenly across every year. Accelerated methods (like double-declining balance) front-load more depreciation into the earlier years, often used when an asset loses most of its value or usefulness early in its life, like technology equipment.

How do I estimate useful life and salvage value?

Industry standards, manufacturer guidance, and historical experience with similar assets are common starting points. For tax depreciation specifically, many jurisdictions publish standard useful-life tables by asset category that must be used regardless of your own estimate.

Does depreciation affect cash flow?

Depreciation itself is a non-cash expense - no actual money leaves the business when it's recorded. The real cash outflow happened when the asset was purchased; depreciation just spreads that already-spent cost across the accounting periods it benefits.

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