Depreciation Calculator
Calculate the annual depreciation of an asset (machinery, vehicle, equipment) using the straight-line method, based on its cost, estimated salvage value, and useful life in years.
Results
Annual depreciation
—
Total depreciation
—
Depreciation = (Asset Value - Salvage Value) / Years
Depreciation Calculator
Depreciation reflects the loss of value of an asset over its useful life due to use, wear, or obsolescence. In accounting, it lets you spread the cost of an asset across the years it generates income, instead of recording it all at once in the year of purchase. This calculator uses the straight-line method, the simplest and most widespread, which splits depreciation into equal yearly amounts.
The formula is: annual depreciation = (asset cost − salvage value) / useful life in years. For example, a machine costing €20,000, with an estimated salvage value of €2,000 at the end of its 6-year useful life, depreciates by €3,000 per year ((20,000−2,000)/6). After 6 years, its book value would be €2,000, matching the salvage value.
Salvage value (or residual value) is an estimate of what the asset will be worth at the end of its useful life, for example if it's sold or decommissioned. It isn't always easy to estimate accurately, and a wrong estimate directly affects the annual depreciation charge: overestimating salvage value artificially lowers each year's depreciation.
The straight-line method is the most common, but others exist (declining balance, units of production) that spread the cost differently, usually allocating more depreciation in the early years. Each country's tax rules set out which methods and useful lives are accepted for calculating deductible depreciation for corporate tax or other business taxes, so check local regulations before applying the result for tax purposes.
Preguntas frecuentes
How is annual straight-line depreciation calculated?
Subtract the salvage value from the asset cost and divide by the useful life in years: (cost − salvage value) / years.
What is salvage value?
It's the estimated value the asset will have at the end of its useful life, for example what it could be sold for as scrap or secondhand.
What is book value?
It's the original cost of the asset minus accumulated depreciation to date; it represents its accounting value, not necessarily its market value.
What if the salvage value is zero?
The formula simplifies to asset cost / useful life, depreciating 100% of the cost over the useful life.
Is depreciation the same as amortization?
In many countries they're used interchangeably for tangible assets, though some reserve "amortization" for intangible assets (patents, software) and "depreciation" for tangible ones.
What useful life should I use for an asset?
It depends on the type of asset and your country's tax rules, which usually publish guideline useful-life tables by asset category (e.g. vehicles, machinery, furniture).
Does depreciation affect the company's cash flow?
Not directly, since it's an accounting entry with no actual cash outflow; but it does reduce accounting profit and, in many countries, the corporate tax base.
Are there other depreciation methods besides straight-line?
Yes, such as declining balance (more depreciation in the early years) or units of production (proportional to actual use of the asset), allowed depending on each country's accounting and tax rules.