Depreciation Expense Calculator
Depreciation expense is the slice of an asset’s cost that lands on the income statement each year, and for straight-line depreciation that slice never changes: cost minus salvage value, divided by useful life. This calculator takes those three numbers and returns the exact annual expense you book, every year, until the asset reaches its salvage value.
One honest note before you start: this is a straight-line tool only. It has no method selector, no declining balance mode, and no units of production mode, whatever older descriptions of this page claimed. If your asset loses value fastest in its early years, the companion tool linked further down handles that pattern instead.
This same amount is expensed in every full year of the asset’s useful life under the straight-line method.
Book depreciation only. This is the straight-line expense for financial reporting and budgeting; tax depreciation under systems such as MACRS in the United States follows different lives and methods, covered in the tax section below.
Quick Answer
Key takeaways
- Straight-line depreciation charges the same expense every year: (cost minus salvage value) divided by useful life. On the worked example that is $4,500 a year for 10 years.
- Salvage value is never depreciated. Only the $45,000 above it is expensed, and the book value stops falling at $5,000.
- This tool is straight-line only, by design and by code. For an asset that loses value fastest when new, use the diminishing value tool linked below instead.
- Book depreciation and tax depreciation are different systems. MACRS and similar tax rules use their own lives and methods, so do not copy this figure straight onto a tax return.
- Quick Answer
- What depreciation expense actually is
- The straight-line formula, and where each number comes from
- Worked example: a $50,000 machine over 10 years
- Straight-line or diminishing value: pick the pattern that matches the asset
- Book depreciation is not tax depreciation
- What competing calculators miss
- Frequently Asked Questions
- Add This Calculator to Your Website
- References
What depreciation expense actually is
Depreciation expense is the portion of an asset's depreciable cost recognized in one accounting period. It is an allocation, not a valuation: the $4,500 on the example machine is not a claim that the machine lost exactly $4,500 of market value that year, it is one tenth of its depreciable base assigned to that year.
Three related figures get confused with it constantly. Accumulated depreciation is the running total of every year's expense so far, a contra-asset on the balance sheet. Book value (carrying amount) is cost minus accumulated depreciation, which is why tracking the asset's adjusted basis matters when it is later sold or written off; the asset adjusted basis calculator covers that side of the ledger. And the depreciable base, cost minus salvage, is the ceiling: total depreciation over the whole life can never exceed it under straight-line.
The matching principle is the reason the system exists. A machine that earns revenue for 10 years should have its cost recognized across those same 10 years, not dumped into the purchase year. International rules say the same thing in formal language: IAS 16, the IFRS standard for property, plant and equipment, requires the depreciable amount to be allocated on a systematic basis over the asset's useful life, and straight-line is the simplest systematic basis there is.
The straight-line formula, and where each number comes from
The formula has one subtraction and one division, and every input has a specific accounting meaning.
Asset cost is more than the sticker price when other spending was needed to make the asset usable: freight, installation, and site preparation are normally capitalized into the cost, while routine repairs are expensed as incurred. Capitalizing too little understates both the asset and every year's expense.
Salvage value is an estimate, and it is the softest number in the formula. A delivery vehicle with a real resale market supports a meaningful salvage estimate; specialized tooling often supports zero. Setting salvage to zero is legitimate and common, and the calculator accepts it: ($50,000 minus $0) / 10 would give $5,000 a year on the example asset.
Useful life is an accounting estimate for book purposes, driven by wear, obsolescence, and policy. It is not the same as a tax recovery period, and the two should not be mixed: a computer depreciated over 4 years for books may sit in a 5 year tax class, which is one reason a vehicle's real-world value path, like the one in the BMW depreciation calculator, rarely matches either schedule.
Worked example: a $50,000 machine over 10 years
The calculator is pre-filled with this case. The expense is a single number, $4,500.00 a year, and the table below is that number applied year by year, which is all a straight-line schedule ever is.
| Point in time | Expense that year | Accumulated depreciation | Book value |
|---|---|---|---|
| Year 1 | $4,500.00 | $4,500.00 | $45,500.00 |
| Year 2 | $4,500.00 | $9,000.00 | $41,000.00 |
| Year 5 | $4,500.00 | $22,500.00 | $27,500.00 |
| Year 10 | $4,500.00 | $45,000.00 | $5,000.00 |
The bars make the defining feature of straight-line visible: the book value falls in a straight line, the same $4,500 step each year, and it stops dead at the $5,000 salvage floor. For monthly reporting, divide the annual figure by 12: $4,500 / 12 = $375.00 a month, the amount most bookkeeping software posts each period for this asset. If the asset was placed in service mid-year, the first year is usually prorated by months in service, which this annual calculator does not do; take the annual figure and prorate it yourself for that first partial year.
Straight-line or diminishing value: pick the pattern that matches the asset
The honest choice between the two common patterns comes down to how the asset actually serves the business.
Straight-line (this tool)
Same expense every year: $4,500 a year on the example machine.
- Best for assets used evenly: buildings, furniture, shelving
- Smooth, predictable profit reporting
- Simplest to explain to auditors and lenders
Diminishing value
A fixed percentage of the shrinking book value: large expense early, small expense late.
- Best for assets that lose value or productivity fastest when new: vehicles, computers
- Front-loads the expense into the early years
- Needs a year-by-year schedule, not one number
Neither pattern changes the total: both depreciate the same $45,000 base on the example machine, they just time it differently. If the diminishing pattern fits your asset, the diminishing value depreciation calculator builds the full year-by-year schedule and puts the two methods side by side, which is the comparison this single-figure tool deliberately does not try to fake.
Book depreciation is not tax depreciation
The figure from this calculator belongs in financial statements and budgets. Tax systems run their own depreciation regimes with prescribed lives, prescribed methods, and conventions that ignore your salvage estimate entirely.
In the United States, IRS Publication 946, How to Depreciate Property, sets out MACRS, the modified accelerated cost recovery system most business assets fall under, including its recovery periods and the rule that salvage value is treated as zero for MACRS property. The deduction is then claimed on Form 4562. Other countries run their own versions: Australia uses prime cost and diminishing value with effective lives published by its tax office, and the United Kingdom uses capital allowances with writing-down rates set in law. The practical rule is simple: use this calculator for the books, and your jurisdiction's tax rules, or your accountant, for the return.
Disclaimer: this calculator is an educational tool for straight-line book depreciation. It is not accounting or tax advice. Useful life and salvage value are estimates that your accountant may set differently, and tax depreciation follows separate rules.
What competing calculators miss
The tools ranking for this term mostly fall into two camps, and both leave something out.
Miss 1: multi-method tools bury the simple answer. The broad depreciation calculators offer straight-line, declining balance, and sum-of-the-years-digits in one form, which is powerful and also a lot of machinery for the most common question in bookkeeping: what is this year's expense? This page answers that question with three inputs and one number, and says plainly that the other methods live on their own pages.
Miss 2: no salvage floor explanation. Several simple tools show the formula but never explain that salvage value is excluded from depreciation, so users depreciate the full cost and overstate the expense. Here the worked example shows the book value stopping at exactly $5,000, and the table proves the total expensed is $45,000, not $50,000.
Miss 3: book and tax figures mixed together. Competitor pages routinely present a straight-line result next to MACRS tables as if they were interchangeable. They are not, and the section above separates them, with the IRS source linked so you can check the tax rules yourself.
Frequently Asked Questions
For straight-line depreciation, subtract the salvage value from the asset cost and divide by the useful life in years. A $50,000 asset with a $5,000 salvage value and a 10 year life gives ($50,000 minus $5,000) / 10 = $4,500 of depreciation expense per year.
No. This tool calculates straight-line depreciation only: it has three inputs (cost, salvage value, useful life) and one output (annual expense). For a declining pattern, use the diminishing value depreciation calculator on this site, which builds a year-by-year schedule. Units of production is not offered here because it needs usage data, such as hours or units produced, that this form does not collect.
Enter 0. The whole cost is then depreciated: a $50,000 asset with no salvage value over 10 years gives $5,000 a year. Zero salvage is common for specialized equipment with no resale market, and it is also how MACRS treats property for United States tax purposes.
The calculator rejects it and shows an error under the salvage field, because it would produce a negative depreciable base. An asset cannot be expected to be worth more at retirement than it cost, so check for a typo in either figure.
Divide the annual result by 12. The $4,500 annual expense on the worked example is $375.00 a month, which is the journal amount most bookkeeping software posts each month. This calculator reports the annual figure only, so the division is yours to make.
Depreciation expense is one year's charge, $4,500 on the worked example, and it appears on the income statement. Accumulated depreciation is the total of all years so far, $22,500 after year 5 on the same example, and it sits on the balance sheet as a deduction from the asset's cost. Book value is cost minus accumulated depreciation.
Not directly. This is book depreciation for financial reporting. Tax depreciation follows its own system, MACRS in the United States as set out in IRS Publication 946, with prescribed recovery periods, methods, and a salvage value of zero. Use this figure for your books and budgets, and the tax rules for your return.
Multiply the annual expense by the number of years passed and subtract from the cost. On the worked example, after 5 years: $50,000 minus (5 x $4,500) = $27,500. The book value never falls below the salvage value, so after year 10 it stays at $5,000.
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References
- Internal Revenue Service, Publication 946, "How to Depreciate Property" - the MACRS rules, recovery periods, and conventions that govern United States tax depreciation and treat salvage value as zero. IRS: Publication 946, How to Depreciate Property. Accessed October 2026.
- Internal Revenue Service, "A Brief Overview of Depreciation" - the IRS small business summary of what property can be depreciated and the difference between expensing and capitalizing. IRS: A Brief Overview of Depreciation. Accessed October 2026.
- Internal Revenue Service, Instructions for Form 4562, "Depreciation and Amortization" - how the tax depreciation deduction is computed and claimed. IRS: Instructions for Form 4562. Accessed October 2026.
- IFRS Foundation, IAS 16, "Property, Plant and Equipment" - the international standard requiring the depreciable amount (cost less residual value) to be allocated systematically over useful life. IFRS Foundation: IAS 16, Property, Plant and Equipment. Accessed October 2026.
- Internal Revenue Service, Publication 946, Chapter 4, "Depreciation Methods" - the straight-line and declining balance method definitions used for the method comparison on this page. IRS: Publication 946, Depreciation Methods. Accessed October 2026.
- Internal Revenue Service, Publication 544, "Sales and Other Dispositions of Assets" - how book value and accumulated depreciation determine gain, loss, and depreciation recapture when a depreciated asset is sold. IRS: Publication 544, Sales and Other Dispositions of Assets. Accessed October 2026.