Straight-line depreciation
A $20,000 asset with a $2,000 salvage value over 5 years depreciates $3,600 a year, every year, under the straight-line method.
Depreciation calculator
This is an estimate for information only. It is not accounting or tax advice — depreciation rules for financial reporting and for tax purposes often differ.
Result
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How it works
Straight-line depreciation is the simplest: the same dollar amount every year. Declining balance front-loads depreciation by applying a fixed percentage to the asset's current book value each year, which shrinks over time — commonly used for assets that lose usefulness fastest when new. Sum-of-years-digits also front-loads depreciation, but through a shrinking fraction rather than a fixed rate.
All three methods reach the same total depreciation (cost minus salvage value) by the end of the useful life — they only disagree on the timing.
Formulas used
Straight-line
Annual depreciation = (Cost − Salvage) ÷ Useful life
Declining balance
Depreciation = Book value × Rate
Sum-of-years-digits
Depreciation = (Cost − Salvage) × Remaining years ÷ Sum of years
Worked examples
Declining balance, front-loaded
The same asset at a 40% declining-balance rate depreciates $8,000 in year one — more than double the straight-line amount — then progressively less each year.
Assumptions and limits
- The asset is placed in service at the start of year one and used for a whole number of years.
- No partial-year depreciation is calculated for the first or last year.
- The useful life and salvage value are known and fixed in advance.
Frequently asked questions
Which method should I use?
Straight-line is the simplest and most common for financial reporting. Declining balance and sum-of-years-digits are "accelerated" methods sometimes used for tax purposes or for assets that genuinely lose value fastest when new — check applicable accounting or tax rules for what is allowed.
Why does declining balance sometimes not reach the salvage value exactly?
Because a fixed percentage of a shrinking number never mathematically reaches zero (or the salvage value) on its own — the last year's depreciation is capped so the book value lands exactly on the salvage value instead of going below it.
What is book value?
The asset's value on the books at a point in time: original cost minus accumulated depreciation so far.
Does depreciation reflect what the asset could actually sell for?
Not necessarily — depreciation is an accounting allocation of cost over time, not a market appraisal. Actual resale value can be higher or lower than the book value.
Updated
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