Depreciation Calculator

How to Calculate Depreciation?

Depreciation is the reduction in the value of a fixed asset over time, often due to wear and tear, usage, or obsolescence. There are several methods to calculate depreciation:

1. Straight-Line (SL) Method

This method spreads the cost of the asset evenly over its useful life.

Formula:

Depreciation Expense = (Cost – Salvage Value) ÷ Useful Life

2. Declining Balance (DB) Method

This method applies a fixed percentage to the asset’s book value each year, leading to higher depreciation in the earlier years.

Formula:

Depreciation Expense = Book Value × Depreciation Rate

3. Sum-of-the-Years’-Digits (SYD) Method

This method accelerates depreciation by applying a fraction based on the remaining useful life of the asset.

Formula:

Depreciation Expense = (Remaining Life ÷ Sum of the Years’ Digits) × (Cost – Salvage Value)

Instead of doing these manually, our fixed asset depreciation calculator applies all three methods instantly.

How to Use the Depreciation Calculator?

Our depreciation calculator is easy to use and supports all three methods:

1. Select your depreciation method: Straight-Line (SL), Declining Balance (DB), or Sum-of-the-Years’-Digits (SYD).
2. Enter the asset cost.
3. Enter the salvage value (the estimated value at the end of its useful life).
4. Enter the useful life in years.
5. Click Calculate.

You’ll immediately see the depreciation expense for each year under the method you selected.

Examples of Calculating Depreciation

Example 1 – Straight-Line Depreciation

Emily’s company bought office equipment worth $10,000, with an estimated salvage value of $2,000 and a useful life of 4 years.

• Depreciation Expense = ($10,000 – $2,000) ÷ 4 = $2,000 per year

  Each year, Emily deducts $2,000, making budgeting predictable.

   

Example 2 – Declining Balance Depreciation

David purchased a machine for $8,000 with a useful life of 5 years and an expected salvage value of $500. He chooses the 40% Declining Balance (DB) method.

• Year 1: $8,000 × 40% = $3,200
  Remaining Book Value = $8,000 – $3,200 = $4,800

• Year 2: $4,800 × 40% = $1,920
  Remaining Book Value = $4,800 – $1,920 = $2,880

• Year 3: $2,880 × 40% = $1,152
  Remaining Book Value = $2,880 – $1,152 = $1,728

• Year 4: $1,728 × 40% = $691.20
  Remaining Book Value = $1,728 – $691.20 = $1,036.80

• Year 5: To ensure the salvage value is not breached, depreciation is limited so that the final book value equals the $500 salvage value.
  Depreciation = $1,036.80 – $500 = $536.80
  Remaining Book Value = $500 (salvage value reached)

After 5 years, the machine’s book value is reduced to its salvage value of $500, and the total depreciation recorded is $7,500.

Example 3 – Sum-of-the-Years’-Digits Depreciation

Sophia purchased a delivery van for $15,000, with a salvage value of $3,000 and an estimated useful life of 4 years.

• Sum of digits = 4 + 3 + 2 + 1 = 10
• Year 1: (4 ÷ 10) × ($15,000 – $3,000) = $4,800
• Year 2: (3 ÷ 10) × $12,000 = $3,600
• Year 3: (2 ÷ 10) × $12,000 = $2,400
• Year 4: (1 ÷ 10) × $12,000 = $1,200

Sophia sees that the expense is higher in the early years, reflecting heavier use.

Find Out: Depreciation Schedule Template Excel

Disclaimer

This online depreciation calculator is provided for informational purposes only. Depreciation rates and methods may vary depending on accounting standards, tax laws, and business policies. Always consult with a qualified accountant or tax advisor before filing financial statements.

FAQs

How to calculate depreciation on property?

To calculate depreciation on property (like real estate), you typically use the Straight-Line (SL) Method, especially in accounting for buildings or rental properties.

Formula: Depreciation Expense = (Cost – Salvage Value) ÷ Useful Life

Is there a formula for depreciation?

Yes, there are multiple formulas, depending on the depreciation method used:

• Straight-Line (SL): Depreciation Expense = (Cost – Salvage Value) ÷ Useful Life
• Declining Balance (DB): Depreciation Expense = Book Value × Depreciation Rate
• Sum-of-the-Years’-Digits (SYD): Depreciation Expense = (Remaining Life ÷ Sum of the Years’ Digits) × (Cost – Salvage Value)

How to calculate the sum of years' depreciation?

Using the Sum-of-the-Years’-Digits (SYD) method:

1. Add the years of the asset’s useful life:
   For 4 years: 4 + 3 + 2 + 1 = 10
2. Use this formula each year: Depreciation Expense = (Remaining Life ÷ Sum of the Years’ Digits) × (Cost – Salvage Value)

Example: Liam buys a 3D printer for his design studio.

• Cost: $9,000
• Salvage Value: $1,500
• Useful Life: 5 years

Step 1: Calculate the sum of the years

5+4+3+2+1=15

Step 2: Calculate the depreciable amount

Depreciable Amount=9,000−1,500=7,500

Step 3: Calculate depreciation for each year

• Year 1: (5 ÷ 15) × 7,500 = $2,500
• Year 2: (4 ÷ 15) × 7,500 = $2,000
• Year 3: (3 ÷ 15) × 7,500 = $1,500
• Year 4: (2 ÷ 15) × 7,500 = $1,000
• Year 5: (1 ÷ 15) × 7,500 = $500

What are the three main items to consider when calculating depreciation?

There are three main items:

1. Cost of the asset
2. Salvage value (residual value at end of life)
3. Useful life (in years)

What is the formula for 5-year depreciation?

 You can calculate 5-year depreciation by using this formula:

Depreciation Expense = (Cost – Salvage Value) ÷ 5

How to calculate depreciation for 2.5 years?

To calculate depreciation for 2.5 years, multiply the annual depreciation by 2.5.

Example (SL Method):

• Cost = $10,000
• Salvage = $2,000
• Life = 5 years

Annual Depreciation = ($10,000 – $2,000) / 5 = $1,600
So, 2.5 years = $1,600 × 2.5 = $4,000

How to calculate depreciation using book value?

You use the Declining Balance (DB) method, which calculates depreciation based on the asset's book value at the beginning of each year.

Formula:  Depreciation Expense = Book Value × Depreciation Rate

Example:

Amira’s company buys a laser cutting machine for $12,000.

• Depreciation Method: Declining Balance
• Depreciation Rate: 40%
• Useful Life: 3 years

We'll apply the declining balance method using the book value each year.

Year-by-Year Depreciation

Year 1

• Beginning Book Value: $12,000
• Depreciation: $12,000 × 40% = $4,800
• Ending Book Value: $12,000 – $4,800 = $7,200

Year 2

• Beginning Book Value: $7,200
• Depreciation: $7,200 × 40% = $2,880

• Ending Book Value: $7,200 – $2,880 = $4,320

   

Year 3

• Beginning Book Value: $4,320
• Depreciation: $4,320 × 40% = $1,728
• Ending Book Value: $4,320 – $1,728 = $2,592