Straight-line depreciation spreads an asset's cost evenly over its useful life: (cost − salvage) ÷ life.
How the Depreciation Calculator works
unusedExample calculation
Say your business buys a packaging machine for $50,000, expects to use it for 10 years, and estimates it will be worth $5,000 as scrap at the end. The depreciable base is $50,000 - $5,000 = $45,000. Divide by the 10-year life and the annual straight-line depreciation is $4,500 per year, or about $375 per month.
Here is how the book value walks down over the first few years. Each year you record a $4,500 expense, accumulated depreciation grows by $4,500, and book value drops by the same $4,500:
| Year | Depreciation | Accumulated depreciation | Book value (end of year) |
|---|---|---|---|
| Start | - | $0.00 | $50,000.00 |
| 1 | $4,500.00 | $4,500.00 | $45,500.00 |
| 2 | $4,500.00 | $9,000.00 | $41,000.00 |
| 3 | $4,500.00 | $13,500.00 | $36,500.00 |
| 10 | $4,500.00 | $45,000.00 | $5,000.00 |
After 10 years, accumulated depreciation equals the $45,000 base and book value sits at the $5,000 salvage value - exactly where straight-line is designed to stop. If you keep using the machine in year 11, you record no further depreciation and simply carry it on the books at $5,000.
Tips for using the Depreciation Calculator
- Always subtract salvage value before dividing. The depreciable base is cost minus salvage, so a $12,000 asset with $2,000 salvage depreciates $10,000 over its life, not $12,000.
- Keep two sets of numbers if you run a business: a straight-line schedule for your financial statements and MACRS for your US tax return. The IRS generally requires MACRS, so your book figure is not your tax deduction.
- Match useful life to how long the asset stays productive in your business, not how long it could physically survive. Doubling the life from 5 to 10 years halves the annual expense on the same base.
- Prorate the first year for assets placed in service mid-year. A $15,000 asset over 5 years is $3,000 a year, but if it goes into service in July you book only $1,500 that first year.
- Use =SLN(cost, salvage, life) in Excel or Google Sheets to get the flat annual amount instantly, then build a running accumulated-depreciation column to track book value year by year.
- Never let book value fall below salvage value. Once accumulated depreciation equals the base, stop depreciating and carry the asset at salvage even if you keep using it.
- Do not confuse book value with resale value. A truck carried at $24,000 on your books may sell for far less; depreciation allocates cost, it does not predict the market.
- Consider Section 179 or bonus depreciation when you want a big first-year tax deduction, but remember they only change the timing - total deductions still cap at cost minus salvage.
- Sanity-check your useful-life estimate against common US recovery periods (5 years for computers and vehicles, 7 for furniture, 27.5 for residential rental buildings) before settling on a number.
- Remember that land is never depreciated. For a building purchase, separate the land value out and depreciate only the structure and improvements.
Straight-line vs declining balance, units-of-production, and MACRS
Straight-line is the simplest of the common depreciation methods, and it is the one this calculator uses; the alternatives front-load the expense or tie it to usage. The table below compares the four main approaches on the same $10,000 asset with a 5-year life and $0 salvage so you can see how the first-year expense differs.
| Method | How it works | Year-1 expense on $10,000 | Best for |
|---|---|---|---|
| Straight-line | Even (cost - salvage) / life every year | $2,000.00 | Books, budgeting, steady-use assets |
| Double-declining balance | 2 x straight-line rate (40%) applied to book value | $4,000.00 | Assets that lose value fast early |
| Units-of-production | (cost - salvage) / total output, times units made | Varies with output | Machines tied to volume |
| MACRS (US tax) | IRS percentage tables by asset class | $2,000.00 (5-yr class, half-year) | US federal tax returns |
Double-declining balance (DDB) uses twice the straight-line rate - 2/5 = 40% here - applied to the shrinking book value: $4,000, then $2,400, $1,440, $864, and $518.40. That is the same depreciable base spread differently, with a bigger early write-off. MACRS is what the IRS actually requires for most US tax depreciation; its 5-year class spreads cost over six tax years (20%, 32%, 19.2%, 11.52%, 11.52%, 5.76%) under the half-year convention. Because of this, many businesses keep a straight-line schedule for their financial statements and run MACRS on the tax return.
Why salvage value and useful life are estimates that change the answer
Salvage value and useful life are the two inputs you choose, and small changes in them move the annual expense a lot. Salvage value is your estimate of what the asset is worth at the end of its useful life - resale or scrap. A higher salvage estimate shrinks the depreciable base and lowers annual depreciation; a $40,000 asset over 8 years drops $5,000 a year at $0 salvage but only $4,000 a year at an $8,000 salvage. Useful life is how long you expect the asset to be productive in your business, not how long it physically lasts. Stretching life from 5 to 10 years cuts the annual expense in half on the same base. Pick these estimates honestly: inflating salvage or life understates expense and overstates profit, which auditors and the IRS both notice.
Accounting depreciation vs resale depreciation - they are not the same thing
Accounting depreciation is a cost-allocation rule; resale depreciation is what the market will actually pay - and the two rarely match. When people say a new car loses 20% the moment you drive off the lot, they mean resale value, driven by supply, demand, and condition. Straight-line book depreciation ignores all of that: a $40,000 truck depreciated over 5 years drops a flat $8,000 a year on your books even if its real market price falls faster early and slower later. The purpose is different. Book depreciation exists to match an asset's cost to the years it earns revenue (the matching principle), so each year's profit is comparable. Resale depreciation exists to price a used asset. Use this calculator for books, budgets, and expense planning - not to predict trade-in value.
Section 179 and bonus depreciation: immediate write-offs vs spreading it out
Section 179 and bonus depreciation let a business deduct most or all of an asset's cost in year one instead of spreading it over the useful life. Straight-line on $25,000 of equipment over 5 years is $5,000 a year; Section 179 can let an eligible business expense the entire $25,000 immediately, subject to annual IRS dollar limits and a taxable-income cap. Bonus depreciation is a separate first-year allowance that applies after Section 179 and is not capped by taxable income. Both are tax-timing tools - they pull deductions forward to cut this year's tax bill, but they do not increase the total you can deduct, which is still cost minus salvage. This calculator does not model Section 179 or bonus depreciation; it gives the steady straight-line schedule many businesses still keep for their financial statements even when they accelerate on the tax return. If you are weighing the cost of financed equipment against this write-off timing, our business loan calculator can size the payment side.
Common straight-line depreciation mistakes
- Depreciating the full cost. The base is cost minus salvage. A $12,000 asset with $2,000 salvage depreciates $10,000 total, not $12,000.
- Forgetting salvage value entirely. Leaving salvage at $0 when the asset has real resale value overstates expense every year.
- Letting book value fall below salvage. Straight-line stops once accumulated depreciation equals the base; you never depreciate past salvage value.
- Confusing book and tax depreciation. Your $4,500-a-year straight-line book figure is not what goes on a US tax return - the IRS generally requires MACRS.
- Not prorating the first year. An asset placed in service mid-year usually gets a partial first-year expense, not a full year.
- Treating it as market value. Book value after depreciation is an accounting number, not what the asset would sell for.
How to calculate straight-line depreciation by hand or in Excel
By hand, the whole method is one division: (cost - salvage) / useful life. For a $45,000 asset with $7,000 salvage over 8 years, that is ($45,000 - $7,000) / 8 = $38,000 / 8 = $4,750 per year, or $4,750 / 12 = about $395.83 per month. To find book value in any year, multiply the annual figure by the number of years elapsed and subtract from cost: after 3 years, $45,000 - (3 x $4,750) = $30,750.
In Excel or Google Sheets, use the built-in =SLN(cost, salvage, life) function: =SLN(45000,7000,8) returns $4,750. For accelerated methods, Excel offers =DB() (declining balance) and =DDB() (double-declining balance), and =SYD() for sum-of-the-years-digits. To build a full schedule, list each year, put the SLN result in every row, add a running total for accumulated depreciation, and subtract that from cost for book value.
Benchmark depreciation periods and what is typical
There is no single correct useful life, but US tax recovery periods give a widely used benchmark. The table shows common MACRS classes and what tends to fall in each; for book purposes, businesses often pick a life close to these.
| Recovery period | Typical assets |
|---|---|
| 3 years | Some tools, certain software, tractor units |
| 5 years | Computers, vehicles, office equipment |
| 7 years | Office furniture, fixtures, many machines |
| 15 years | Land improvements, some site work |
| 27.5 years | Residential rental property (building only) |
| 39 years | Nonresidential (commercial) real property |
Note that land is never depreciated - only the building and improvements on it. A $100,000 residential rental building straight-lined over 27.5 years is about $3,636.36 a year. Choosing a life far outside these norms invites scrutiny, so use them as a sanity check on your own estimate.
Straight-line depreciation quick-reference: annual and monthly amounts
Straight-line annual depreciation equals (cost - salvage value) / useful life, and monthly is that figure divided by 12. The table below recomputes common cost, salvage, and life combinations so you can sanity-check this calculator. Notice that a higher salvage value lowers the depreciable base, and a longer life spreads the same base into smaller yearly amounts.
| Asset cost | Salvage value | Useful life | Depreciable base | Annual depreciation | Monthly depreciation |
|---|---|---|---|---|---|
| $10,000 | $0 | 5 years | $10,000 | $2,000.00 | $166.67 |
| $10,000 | $2,000 | 5 years | $8,000 | $1,600.00 | $133.33 |
| $12,000 | $2,000 | 5 years | $10,000 | $2,000.00 | $166.67 |
| $25,000 | $5,000 | 10 years | $20,000 | $2,000.00 | $166.67 |
| $50,000 | $5,000 | 10 years | $45,000 | $4,500.00 | $375.00 |
| $50,000 | $0 | 7 years | $50,000 | $7,142.86 | $595.24 |
| $100,000 | $10,000 | 20 years | $90,000 | $4,500.00 | $375.00 |
| $200,000 | $20,000 | 15 years | $180,000 | $12,000.00 | $1,000.00 |
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For a related deep dive, see IRS Publication 946: How To Depreciate Property.
Depreciation Calculator — frequently asked questions
- Other methods?
- Declining balance and units-of-production front-load or vary depreciation; this tool uses straight-line.
- Why depreciate?
- It matches an asset's expense to the periods it helps generate revenue.
- What is salvage value?
- The estimated resale or scrap value at the end of the asset's useful life.
- Why depreciate at all?
- It spreads a big purchase across the years it helps generate revenue.
- How much does a $12,000 asset with a $2,000 salvage value depreciate each year over 5 years?
- It depreciates $2,000 per year, or about $166.67 per month. Straight-line depreciation takes the depreciable base (cost minus salvage) and spreads it evenly: ($12,000 - $2,000) / 5 = $2,000 a year. After 5 years you have expensed $10,000 total, leaving the $2,000 salvage value as the asset's ending book value.
- What is the annual straight-line depreciation on a $50,000 machine with a 10-year life and $5,000 salvage?
- The machine depreciates $4,500 per year, about $375 per month. The math is ($50,000 - $5,000) / 10 = $4,500 each year for 10 years. Total depreciation reaches $45,000, and book value falls to the $5,000 salvage value at the end of year 10. Salvage is excluded because you do not expense what you expect to recover.
- How do I calculate straight-line depreciation in Excel?
- Use the formula =SLN(cost, salvage, life). For a $45,000 asset with $7,000 salvage over 8 years, enter =SLN(45000,7000,8), which returns $4,750 per year. SLN gives the same flat annual amount every period. For monthly, divide by 12: $4,750 / 12 = about $395.83. Excel also has =DB() and =DDB() if you later need an accelerated method.
- What is the straight-line depreciation rate for a 5-year, 7-year, or 10-year asset?
- The straight-line rate is 1 divided by the useful life: 20% for 5 years, about 14.29% for 7 years, and 10% for 10 years. You apply that rate to the depreciable base (cost minus salvage) each year. For example, 20% of a $10,000 base is $2,000 a year. A 3-year asset is 33.33% and a 15-year asset is about 6.67%.
- What will the book value of a $20,000 asset be after 3 years if salvage is $2,000 and life is 5 years?
- Book value after 3 years is $9,200. Annual depreciation is ($20,000 - $2,000) / 5 = $3,600. Three years of $3,600 equals $10,800 in accumulated depreciation, so $20,000 - $10,800 = $9,200. Book value is cost minus accumulated depreciation, and it never drops below salvage value ($2,000 here) under straight-line.
- Straight-line vs double-declining balance on a $10,000 asset over 5 years - what is the difference?
- Straight-line expenses a flat $2,000 every year; double-declining balance (DDB) front-loads it. DDB uses 2/5 = 40% on book value, so year 1 is $4,000, then $2,400, $1,440, $864, and $518.40 - totaling $9,222.40, with the small remainder usually cleaned up by switching to straight-line at the end. DDB gives a bigger early write-off, while this calculator uses the simpler even straight-line approach.
- Why does my accounting depreciation differ from what my truck is actually worth?
- Accounting depreciation is a cost-allocation rule, not a market price. A $40,000 truck depreciated straight-line over 5 years drops $8,000 a year on your books regardless of resale value, while the actual market price might fall 20%+ in year one alone. Book depreciation matches the expense to the years the asset earns revenue; resale depreciation reflects supply and demand. They almost never line up.
- How is Section 179 different from straight-line depreciation on $25,000 of equipment?
- Section 179 lets an eligible business expense the full $25,000 in year one, while straight-line spreads it as $5,000 per year for 5 years ($25,000 / 5 with no salvage). Section 179 is an immediate tax deduction subject to annual IRS dollar limits and a taxable-income cap; straight-line is the steady book method. Many businesses use Section 179 for taxes but keep straight-line schedules for their financial statements.
- What is units-of-production depreciation on a $60,000 machine rated for 200,000 units?
- If the machine produces 30,000 units in a year, depreciation is $9,000 that year. The rate is ($60,000 - $0 salvage) / 200,000 = $0.30 per unit, and $0.30 x 30,000 = $9,000. Unlike straight-line, this method ties the expense to actual output, so a slow year costs less and a busy year costs more. This tool uses straight-line instead.
- How much does a $3,500 laptop depreciate per year with a $500 salvage over 3 years?
- It depreciates $1,000 per year, about $83.33 per month. The calculation is ($3,500 - $500) / 3 = $1,000 annually. After 3 years you will have expensed $3,000, leaving the $500 salvage as book value. In practice many small businesses expense low-cost equipment immediately under a de minimis safe harbor rather than depreciating it, but the straight-line math above is the textbook approach.
- How do I depreciate an asset placed in service partway through the year?
- Prorate the first year by the months in service. A $15,000 asset with no salvage over 5 years depreciates $3,000 a year, or $250 a month. If you place it in service in July (6 months), the first year is $250 x 6 = $1,500. The remaining $1,500 carries into the schedule, extending the final year. The IRS uses formal conventions (like half-year) for tax depreciation.
- Is straight-line depreciation better than accelerated depreciation?
- Neither is universally better - it depends on your goal. Straight-line gives smooth, predictable expense (a $50,000 asset over 10 years is a flat $5,000 a year), which makes financial statements easier to read and budget. Accelerated methods like double-declining front-load deductions to cut taxes sooner. For US tax returns the IRS generally requires MACRS, so businesses often run straight-line for books and an accelerated method for taxes.
- What is the depreciable base, and how does salvage value change it?
- The depreciable base is cost minus salvage value - the total amount you actually expense over the asset's life. For a $45,000 asset with $7,000 salvage, the base is $38,000, not $45,000. Salvage is your estimate of resale or scrap value at the end of useful life, and you never depreciate below it. A higher salvage estimate means a smaller base and smaller annual depreciation.
- Does total straight-line depreciation ever exceed the asset's cost?
- No - total depreciation can never exceed cost minus salvage. An $18,000 asset with $3,000 salvage over 6 years depreciates $2,500 a year, and 6 x $2,500 = $15,000 total, which equals the depreciable base exactly. Once accumulated depreciation hits $15,000, book value sits at the $3,000 salvage and you stop. If you keep using the asset, you carry it at salvage value.
- Why do businesses depreciate buildings over decades instead of expensing them at once?
- Depreciation matches a long-lived asset's cost to the many years it generates revenue, so one year is not unfairly burdened. A $100,000 improvement with $10,000 salvage over 20 years is $4,500 a year ($90,000 / 20), about $375 a month, instead of a single $100,000 hit. This matching principle keeps profit comparable year to year. US tax law uses fixed recovery periods, such as 27.5 years for residential rental property.
- What annual depreciation does a $200,000 asset with $20,000 salvage and a 15-year life produce?
- It depreciates $12,000 per year, exactly $1,000 per month. The base is $200,000 - $20,000 = $180,000, and $180,000 / 15 = $12,000 a year. Over 15 years that totals $180,000, leaving book value at the $20,000 salvage. Because straight-line is flat, every one of those 15 years carries the same $12,000 expense, which makes long-term forecasting straightforward.
Guides & articles
- Straight-Line vs Declining Balance vs MACRS Depreciation: Which Method and When
- How to Calculate Straight-Line Depreciation by Hand and in Excel
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