Depreciation Calculator
Build a full depreciation schedule under straight line, double declining balance, sum of years digits or MACRS, with book value by year and the switch point where methods cross.
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Spreading a cost over the years it earns
An asset bought for cash today produces revenue for years, so charging its whole cost against the year of purchase would understate that year's profit and overstate every later one. Depreciation allocates the cost across the useful life. The method chosen changes the timing but never the total: every method eventually charges the same amount, which is cost less salvage value, and the only question is how quickly.
Accelerated methods front load the deduction
Double declining balance charges twice the straight line rate against the reducing book value, so the first year takes a much larger share. Sum of years digits does something similar with a different weighting. Both reflect the reality that many assets lose value fastest when new, and both are attractive for tax purposes because a deduction taken sooner is worth more in present value terms even though the total is identical.
MACRS is a tax system, not an accounting method
In the United States, tax depreciation follows the Modified Accelerated Cost Recovery System, which assigns each asset class a recovery period and a fixed table of percentages, ignores salvage value entirely, and applies a half year convention in the first and last years. It regularly produces a different number from the book depreciation in the financial statements, and that difference is a deferred tax item rather than an error. The calculator shows the schedule for each method so the divergence is visible.
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Frequently Asked Questions
Which method should I use?
Straight line for financial reporting unless the asset genuinely loses value faster when new. An accelerated method for tax where the jurisdiction permits it, because an earlier deduction is worth more. In the United States, tax depreciation follows MACRS regardless of the book method.
Does the method change the total depreciation?
No. Every method charges the same total, which is cost less salvage value, over the asset life. Only the timing differs, which is why the choice matters for cash flow and taxes rather than for total profit.
Why does MACRS ignore salvage value?
Because the tax code says so. MACRS recovers the full basis over the recovery period regardless of any expected residual value, which is one of several ways tax depreciation deliberately diverges from economic reality.
What is the half year convention?
MACRS assumes assets are placed in service at the midpoint of the year, so only half a year of depreciation is taken in year one and the schedule extends one year beyond the nominal recovery period. A mid quarter convention applies instead if a large share of assets is placed in service late in the year.
When does declining balance switch to straight line?
When the straight line charge on the remaining book value over the remaining life exceeds the declining balance charge. Switching at that point maximises the deduction, and MACRS tables have the switch built in.
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How to Use
Enter asset cost, salvage value and useful life, then choose a depreciation method.
Disclaimer: This tool is provided "as is" without warranty of any kind. Results are for educational and utility purposes.
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