Depreciation formulas (Straight‑Line, Declining Balance, SYD)

Depreciation is the accounting way of spreading the cost of a long‑term asset (like a laptop, a vehicle, equipment, or furniture) over the years you use it. Instead of counting the entire purchase as an expense on day one, you “allocate” that cost gradually. This calculator supports three of the most common methods: Straight‑Line, Declining Balance (including Double‑Declining), and Sum‑of‑Years’ Digits (SYD).

• Cost (basis): What you paid for the asset (often plus shipping, setup, and installation).
• Salvage value: What you expect the asset to be worth at the end (also called residual value).
• Useful life: How many years you plan to use the asset.
• Depreciable base: Cost − Salvage. This is the amount that gets depreciated.

Straight‑Line is the “even and calm” method: the same depreciation expense each year. It’s popular because it’s easy to explain, easy to audit, and it makes expense patterns smooth (great for planning).

• Annual depreciation: (Cost − Salvage) ÷ Life
• Book value after year t: Cost − (Annual × t) (but never below Salvage)

Declining Balance writes off more value earlier. Many real‑world assets lose value faster at the beginning (think cars, electronics, and some machines), so accelerated methods can feel “more realistic.” The most common version is Double‑Declining Balance (DDB).

• Depreciation rate: typically 2 ÷ Life (that’s “double” the straight‑line rate)
• Year t depreciation: BookValueStart × Rate
• Floor at salvage: in the final years, depreciation is capped so that the ending book value doesn’t dip below salvage value.

SYD is another accelerated method, but instead of using a percentage rate on book value, it uses a weighted fraction of the depreciable base. Early years get bigger fractions, later years get smaller ones.

• Sum of years: 1 + 2 + … + Life = Life(Life+1)/2
• Year t weight: (Remaining life in year t) ÷ (Sum of years)
• Year t depreciation: Weight × (Cost − Salvage)

Heads‑up: depreciation rules for taxes can differ by country and may include special schedules, section limits, bonus depreciation, and other rules. This page focuses on general accounting math.

Examples you can screenshot (and reuse)

Let’s use a simple asset to see how the methods differ. Imagine you buy equipment for $10,000, expect a salvage value of $1,000, and plan to use it for 5 years. Your depreciable base is $10,000 − $1,000 = $9,000.

Annual depreciation is $9,000 ÷ 5 = $1,800. Each year you expense $1,800 until the book value hits $1,000.

• End of Year 1 book value: $10,000 − $1,800 = $8,200
• End of Year 5 book value: $1,000 (the salvage floor)

DDB rate is 2 ÷ 5 = 40%. Year 1 depreciation is $10,000 × 40% = $4,000. Year 2 uses the new book value: $6,000 × 40% = $2,400, and so on. Near the end, the calculator caps depreciation so the book value doesn’t drop below $1,000.

• Year 1 expense is large (useful if the asset loses value fast).
• Later years get smaller and smaller expenses.

Sum of years for life=5 is 5×6/2 = 15. Year 1 weight is 5/15, Year 2 is 4/15, and so on. Year 1 depreciation becomes (5/15) × $9,000 = $3,000. Year 5 depreciation is (1/15) × $9,000 = $600.

TL;DR: Straight‑Line is smooth and predictable. Declining Balance and SYD are “front‑loaded”: bigger write‑offs early, smaller later.

What this Depreciation Calculator actually computes

When you press Calculate Depreciation, the calculator builds a year‑by‑year schedule. For every year it computes four values: Beginning book value, Depreciation expense, Accumulated depreciation, and Ending book value.

• Beginning book value: what the asset is “carried at” at the start of the year.
• Depreciation expense: how much value you write off for that year.
• Accumulated depreciation: total depreciation taken so far.
• Ending book value: beginning book value minus that year’s depreciation.

• The calculator will not let salvage exceed cost (because you can’t depreciate negative value).
• The book value will never go below salvage value (it “floors” at salvage).
• For Declining Balance, the final year often gets adjusted to land exactly on salvage.

If you’re using depreciation for a budget or a pitch deck, the schedule table is the part investors and accountants love: it gives you a clean, auditable trail from purchase price to end‑of‑life value.

Viral tip: Try changing the method and screenshot the schedule difference. It’s surprisingly shareable for founders, finance students, and anyone comparing “expense timing.”

Frequently Asked Questions

• What is depreciation in simple terms?

  Depreciation is how you spread the cost of an asset over time. Instead of saying “I spent $10,000 today,” you say “I’m using this $10,000 asset for 5 years, so I’ll expense part of it each year.”

• What’s the difference between book value and market value?

  Book value is an accounting number: cost minus accumulated depreciation. Market value is what someone would actually pay today. They can be very different.

• Which depreciation method should I use?

  If you want simplicity and consistency, choose Straight‑Line. If the asset loses value quickly early on, an accelerated method (Declining Balance or SYD) may match reality better. For taxes, follow the rules that apply to your region and asset class.

• Why does Declining Balance not always reach salvage automatically?

  Because it’s a percentage of a shrinking book value. Many schedules need a final‑year adjustment so the asset ends exactly at salvage. This calculator applies that cap automatically.

• Can I depreciate land?

  Usually no. Land generally doesn’t wear out like equipment does. Buildings and improvements are often depreciable, but the land component isn’t.

• Does this calculator handle partial years?

  This version focuses on full‑year schedules. If you need partial‑year conventions (mid‑month, half‑year, etc.), you can still use the math here as a baseline and then apply the rule your accountant uses.

When a depreciation schedule is actually useful

Depreciation sounds like “accounting stuff,” but it shows up everywhere once you start looking: small business pricing, startup burn rate, personal finance decisions, and even student homework problems. Here are a few real scenarios where a quick depreciation schedule helps.

• Budgeting: If you buy equipment today, depreciation helps you see the annual “cost of using it,” not just the upfront spend.
• Pricing & margins: If a machine supports your service, depreciation can be part of your cost model (especially for high‑ticket work).
• CapEx planning: Comparing two options (cheap now vs expensive + longer life) is easier when both are expressed as yearly costs.
• Investor decks: Depreciation affects profit, EBITDA adjustments, and forecasts. Even a simple schedule makes you look organized.

• Car ownership: Depreciation is often the single biggest “hidden” cost. A schedule makes that visible.
• Gadgets & upgrades: If you replace a laptop every 2–3 years, straight‑line can estimate your true annual cost of ownership.
• Rental property planning: (Rules vary) but understanding the concept helps you talk to your CPA with confidence.

The point: depreciation converts a one‑time purchase into a time‑based story. That makes trade‑offs easier: use it longer, sell earlier, or choose the asset with the best value retention.

Depreciation errors that mess up results

• Salvage > cost: If salvage is higher than cost, you’re trying to depreciate a negative amount. This calculator blocks that.
• Life too short: A 1‑year life on long‑lived equipment will exaggerate annual expense and can mislead planning.
• Mixing accounting vs tax rules: Your tax depreciation method might be different from your financial statements method.
• Forgetting maintenance: Depreciation is not maintenance. An asset can depreciate while also requiring repairs.
• Assuming book value = resale value: Book value is math; resale value is the market. Don’t confuse them.

If you’re using this for school, confirm which method your problem expects. If you’re using it for a business decision, pick the method that best matches how the asset actually loses value.

• Cost basis: what you capitalize as the asset’s cost.
• Useful life: the period you expect to use the asset.
• Depreciable base: cost minus salvage.
• Accumulated depreciation: total depreciation taken to date.
• Book value: cost minus accumulated depreciation (floored at salvage in this tool).