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Advanced depreciation calculator with 5 methods: Straight Line, Declining Balance, Double Declining, Sum of Years Digits & Units of Production. Calculate tax savings and generate detailed schedules instantly.
| Year | Opening | Depreciation | Closing |
|---|---|---|---|
| 1 | $10,000,000 | $400,000 | $9,600,000 |
| 2 | $9,600,000 | $400,000 | $9,200,000 |
| 3 | $9,200,000 | $400,000 | $8,800,000 |
| 4 | $8,800,000 | $400,000 | $8,400,000 |
| 5 | $8,400,000 | $400,000 | $8,000,000 |
| 6 | $8,000,000 | $400,000 | $7,600,000 |
| 7 | $7,600,000 | $400,000 | $7,200,000 |
| 8 | $7,200,000 | $400,000 | $6,800,000 |
| 9 | $6,800,000 | $400,000 | $6,400,000 |
| 10 | $6,400,000 | $400,000 | $6,000,000 |
| 11 | $6,000,000 | $400,000 | $5,600,000 |
| 12 | $5,600,000 | $400,000 | $5,200,000 |
| 13 | $5,200,000 | $400,000 | $4,800,000 |
| 14 | $4,800,000 | $400,000 | $4,400,000 |
| 15 | $4,400,000 | $400,000 | $4,000,000 |
| 16 | $4,000,000 | $400,000 | $3,600,000 |
| 17 | $3,600,000 | $400,000 | $3,200,000 |
| 18 | $3,200,000 | $400,000 | $2,800,000 |
| 19 | $2,800,000 | $400,000 | $2,400,000 |
| 20 | $2,400,000 | $400,000 | $2,000,000 |
| Total | - | $8,000,000 | $2,000,000 |
Total Tax Savings:
$2,400,000
Over 20 years
Office Building
Building
Equal depreciation expense each year. Simple and widely used method.
Annual Depreciation = (Cost - Salvage) / Useful Life
Higher depreciation in early years. Accelerated depreciation method.
Depreciation = Book Value × Rate
Accelerated method based on sum of years. Higher early depreciation.
Depreciation = (Cost - Salvage) × (Remaining Life / Sum)
Expert Insight: This calculator is designed by financial professionals to help businesses and individuals accurately calculate asset depreciation using IRS-approved methods and GAAP standards.
Depreciation is the systematic allocation of the cost of a tangible asset over its useful life. It represents the decline in value of an asset due to wear and tear, obsolescence, age, or usage. Depreciation is a non-cash expense that reduces taxable income while reflecting the true cost of using assets in business operations.
Understanding depreciation is crucial for businesses, accountants, and investors as it affects financial statements, tax liability, and investment decisions. Proper depreciation calculation ensures accurate financial reporting and maximizes tax benefits.
The most common and simplest method. Spreads asset cost evenly over its useful life.
Annual Depreciation = (Purchase Price - Salvage Value) / Useful Life
Best for: Buildings, furniture, assets providing consistent value over time
Example: $10,000 equipment, $1,000 salvage, 5 years = $1,800/year
Accelerated method applying a constant rate to declining book value each year.
Annual Depreciation = Book Value × Depreciation Rate
Best for: Vehicles, technology, assets losing value quickly early on
Most aggressive accelerated method, doubling the straight-line rate for maximum early depreciation.
Rate = (2 / Useful Life) × 100%
Best for: High-tech equipment, computers, machinery with rapid obsolescence
Accelerated method using a fraction based on sum of years of useful life.
Depreciation = (Remaining Life / Sum of Years) × Depreciable Amount
Best for: Assets requiring more maintenance as they age
Based on actual usage or production output rather than time.
Depreciation = (Units Produced / Total Units) × Depreciable Amount
Best for: Manufacturing equipment, vehicles based on mileage
Calculate using all 5 depreciation methods
Automatic tax savings calculation
Year-by-year depreciation breakdown
Compare all methods side-by-side
Depreciation is a powerful tax-saving tool because it's a non-cash expense that reduces taxable income. This means you get tax deductions without actual cash outlay, improving your business cash flow.
Tax Savings = Depreciation Expense × Tax Rate
Example: $10,000 depreciation at 30% tax rate = $3,000 tax savings
Manufacturing equipment, office machinery, and production tools typically use accelerated methods due to rapid technological obsolescence. Double declining balance maximizes early tax deductions while reflecting actual value decline.
Company vehicles can use either declining balance methods (time-based) or units of production (mileage-based). Mileage-based depreciation often provides more accurate expense matching for delivery vehicles and transportation fleets.
Commercial buildings typically use straight-line depreciation over 27.5-39 years (depending on property type and jurisdiction). This reflects the long, stable useful life of real estate assets.
Computer hardware, software, and IT equipment benefit from accelerated depreciation due to rapid obsolescence. 3-5 year useful life with double declining balance is common for maximum tax benefits.
Office furniture, fixtures, and equipment typically use straight-line depreciation over 7-10 years. This method provides predictable expenses and matches the gradual wear of these assets.
Salvage value is the estimated value of an asset at the end of its useful life. It's the amount you expect to receive when selling or disposing of the asset. The depreciable amount is calculated as Purchase Price minus Salvage Value.
Useful life is the estimated period an asset will be productive and generate revenue. It's determined by factors like physical wear, technological obsolescence, and legal/contractual limits.
Common Useful Lives:
Book value (or carrying value) is the asset's value on the balance sheet. It equals Purchase Price minus Accumulated Depreciation. Book value decreases each year as depreciation is recorded.
Accumulated depreciation is the total depreciation expense recorded for an asset since purchase. It's a contra-asset account on the balance sheet, reducing the asset's book value.
Depreciable amount is the portion of asset cost that will be depreciated. It's calculated as Purchase Price minus Salvage Value. This is the total amount that will be expensed over the asset's useful life.
This depreciation calculator is provided for informational and educational purposes only. While we strive for accuracy, the results should not be considered as professional financial, tax, or accounting advice.
Depreciation rules vary by jurisdiction and can be complex. Tax laws, useful life guidelines, and depreciation methods may differ based on your location, asset type, and specific circumstances.
Always consult with a qualified tax professional, CPA, or financial advisor before making business decisions or filing tax returns based on depreciation calculations. They can provide personalized guidance based on current tax laws and your specific situation.
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