Formula and help

Depreciation Calculator Formula and Help

Learn how this calculator works, what formula it uses, and which assumptions sit behind the estimate.

Educational estimate, not financial advice.

How it works

The Depreciation Calculator builds a generic book-value schedule from asset cost, salvage value, depreciation years, method, optional dollar rounding, and an optional first-year partial convention. It supports straight-line, declining-balance, and sum-of-years-digits methods and shows the first five annual depreciation and ending book-value rows.

Use this calculator when you want to compare how an entered cost, salvage value, useful life, method, and first-year convention change a planning schedule. Use Business Loan when borrowing cost matters, Margin when the asset cost feeds pricing, ROI when depreciation is part of a return comparison, Payback Period when cash recovery timing is the question, and official tax or accounting-standard sources when a real filing, financial statement, asset class, or policy decision depends on the result.

Formula notes

This formula page covers the app's Depreciation Calculator: a generic book-value schedule for asset cost, salvage value, useful life, straight-line depreciation, declining-balance depreciation, sum-of-years-digits depreciation, optional first-year partial conventions, and display rounding. It does not determine tax depreciation, MACRS, capital allowances, asset classes, bonus depreciation, section allowances, filing forms, official accounting policy, impairment, disposal, or depreciation recapture.

basis = max(0, C - S); SL_y = min(BV_(y-1) - S, basis / n); DB_y = min(BV_(y-1) - S, BV_(y-1) * F / n); SYD_y = min(BV_(y-1) - S, basis * (n - y + 1) / (n * (n + 1) / 2)); D_y = min(BV_(y-1) - S, Full_y * p_y); BV_y = max(S, BV_(y-1) - D_y)

The calculator first finds depreciable basis, chooses the selected full-year method, optionally scales only the first year by a partial-year percentage, then subtracts each displayed year's depreciation without letting book value fall below salvage value.

Symbol	Meaning	How this page uses it
C	Asset cost	The Asset cost entered on the calculator.
S	Salvage value	The Salvage value entered on the calculator, capped at asset cost before depreciation is calculated.
basis	Depreciable basis	The nonnegative amount that can be allocated across the schedule: cost minus salvage.
n	Useful life in years	The Depreciation years input after rounding to a whole number and flooring at 1 year.
F	Declining-balance factor	The Depreciation factor input. A factor of 2 creates a double-declining-style rate of 2 divided by useful life.
BV_(y-1)	Beginning book value	The book value at the start of the displayed year being calculated.
Full_y	Full-year depreciation	The method-specific full-year amount before the first-year partial convention is applied.
p_y	Year percentage	The first-year percentage from the partial-year convention for year 1, or 1 for later years.
D_y	Displayed-year depreciation	The depreciation reported for that displayed schedule year.
BV_y	Ending book value	The book value after subtracting the displayed-year depreciation.

Step by step

Cap salvage value at asset cost, then calculate depreciable basis as max(0, asset cost minus salvage value).
Round Depreciation years to a whole number and floor it at 1 before building the schedule.
For straight-line mode, use basis divided by useful life for each full year, capped so book value does not fall below salvage value.
For declining-balance mode, divide the depreciation factor by useful life, multiply that rate by beginning book value, and cap the result at the remaining amount above salvage value.
For sum-of-years-digits mode, divide the remaining-life number by n * (n + 1) / 2, multiply that fraction by basis, and cap the result at the remaining amount above salvage value.
When partial-year depreciation is enabled, calculate a first-year percentage from the selected day, full-month, half-month, full-quarter, half-quarter, or half-year convention. Apply that percentage only to the first displayed year.
If Round to dollars is yes, round each displayed annual depreciation amount to whole dollars before the next book value is calculated. Otherwise, preserve cents.
Subtract the displayed-year depreciation from book value and floor the ending book value at salvage value.
Expose year 1 through year 5 depreciation and book values. The Total depreciation, Final year depreciation, and Final book value outputs are based on those first five displayed rows, not necessarily the full asset life or an extra catch-up year after partial-year depreciation.
Use the formula version, deterministic fixtures, and independent comparator validation as evidence for the generic book-value math, while sending tax and accounting-standard claims to official sources.

Sources and validation

This calculator is an original implementation based on documented formulas, app-specific assumptions, deterministic fixtures, edge cases, rounding policy tests, and internal validation. It is not copied from a single source.

Outputs are checked with deterministic fixtures, edge cases, rounding policy tests, and internal independent comparator checks where overlapping outputs are available. The result remains an educational estimate, not a quote, approval, tax answer, or personalised advice.

IRS Publication 946 should be used for US tax depreciation, MACRS, section 179, bonus depreciation, asset classes, conventions, forms, and recovery periods.
GOV.UK and HMRC capital allowances guidance should be used for UK tax relief, annual investment allowance, writing-down allowance, and business tax examples.
IFRS IAS 16 and relevant FASB Accounting Standards Codification sources should be used when claims discuss accounting-standard treatment, residual value, useful life review, component depreciation, impairment, or financial-statement policy.

See the Calcs.finance methodology for the full review approach.

Assumptions

This is a generic book-value model. It does not choose asset class, useful life, residual value, tax recovery period, MACRS convention, section 179 treatment, special or bonus depreciation, annual investment allowance, writing-down allowance, capital allowance treatment, impairment, disposal treatment, or accounting policy.
The public output exposes five schedule rows. Total depreciation, Final year depreciation, and Final book value are based on those first five displayed rows, which can differ from a full-life schedule when useful life is longer than 5 years or partial-year depreciation leaves unrecovered basis after row 5.
Scoped independent comparator checks pass 4 of 4 scoped fixtures for straight-line, declining-balance, sum-of-years-digits, and one half-month partial-year scenario. Tax depreciation needs official tax authority sources, accounting-standard claims need primary accounting-standard materials, and results are educational estimates, not financial, tax, legal, accounting, filing, investment, lending, or personalised business advice.

Formula version 2026.05.22-generic-depreciation

Common mistakes to avoid

Reading the five displayed schedule rows as a complete tax or accounting depreciation schedule when the selected useful life or partial-year convention can require more context.
Using declining-balance or sum-of-years-digits timing as if it proves the right tax method, asset class, recovery period, section allowance, capital allowance, reporting policy, impairment treatment, or disposal outcome.
Confusing depreciation expense with cash leaving the business. The calculator allocates entered asset cost over displayed years; it does not model purchase financing, maintenance cost, market value, cash flow, sale proceeds, or depreciation recapture.

Worked example

Default examples: $11,000 cost, $1,000 salvage, 5 years

The default calculator inputs use an $11,000 asset cost, a $1,000 salvage value, a 5-year useful life, a factor of 2, and no partial-year depreciation. That creates a $10,000 depreciable basis.

Straight-line mode divides the $10,000 basis by 5 years, so each full displayed year is $2,000 and the fifth displayed book value is $1,000.
Declining-balance mode with factor 2 uses a 40 percent rate because 2 divided by 5 is 0.40. The unrounded fixture depreciates $4,400, $2,640, $1,584, $950.40, and $425.60, then stops at the $1,000 salvage value.
Sum-of-years-digits mode uses a denominator of 15 because 5 + 4 + 3 + 2 + 1 = 15. The first-year fraction is 5/15, so first-year depreciation is $3,333.33 before later years step down.
With half-year partial depreciation in straight-line mode, first-year depreciation is $1,000 instead of $2,000. Rows 2 through 5 still show $2,000 each, so the five displayed rows total $9,000 and end at a $2,000 book value.
That partial-year result illustrates why the displayed total and final book value should be read as first-five-row outputs rather than a complete tax or accounting schedule.

The calculator is useful for comparing depreciation timing under the entered assumptions. It does not decide the right accounting policy, tax method, asset class, recovery period, or filing treatment for a real asset.

What this formula does not include

This is a generic book-value model. It is not a tax depreciation, accounting-standard, audit, filing, or legal determination.
The calculator does not choose asset class, useful life, residual value, depreciation method, tax recovery period, MACRS convention, section 179 treatment, bonus depreciation, annual investment allowance, writing-down allowance, or capital allowance treatment.
Tax depreciation and capital-allowance claims need official sources such as IRS Publication 946 for US tax context or GOV.UK/HMRC capital allowances for UK tax context.
Accounting-standard claims need relevant primary accounting sources, such as IFRS IAS 16 or applicable FASB Accounting Standards Codification material. This page does not state that the calculator complies with any reporting standard.
The public output exposes five schedule rows. Total depreciation, final year depreciation, and final book value are calculated from those first five displayed rows, which can differ from a full-life schedule when useful life is longer than 5 years or partial-year depreciation leaves unrecovered basis after row 5.
The model does not include units-of-production depreciation, component depreciation, impairment, revaluation, maintenance costs, financing costs, disposal proceeds, sale gains or losses, depreciation recapture, inflation, cash flow, or book-tax differences.
Partial-year conventions are simplified first-year percentages. Real tax or accounting conventions can depend on jurisdiction, placed-in-service rules, asset type, fiscal period, and policy choices.
Rounding each displayed annual amount to whole dollars can produce a different path from a full-precision schedule. Unrounded mode preserves cents for accelerated depreciation calculations.
Scoped independent comparator checks currently pass 4 of 4 scoped fixtures for straight-line, declining-balance, sum-of-years-digits, and one half-month partial-year scenario. Validation compares the first and fifth displayed schedule rows plus annual depreciation where available.
The result is an educational estimate from the entered assumptions, not financial, tax, legal, accounting, investment, lending, or personalised business advice.

Terms used in this calculator

Depreciable basis: The nonnegative amount allocated across the schedule. In this calculator, it is max(0, asset cost minus salvage value), after salvage value is capped at asset cost.
Ending book value: The displayed value after subtracting that year's depreciation. The calculator floors book value at salvage value and reports ending book value for years 1 through 5.
Partial-year convention: The selected first-year percentage applied when depreciation starts mid-year. The app applies the selected convention only to the first displayed year; real tax and accounting conventions can depend on official rules and policy choices.

Related next steps

Depreciation calculatorReturn to the calculator and test cost, salvage value, method, useful life, and partial-year assumptions.
Business loan calculatorUse this when depreciation timing is being compared with borrowing cost assumptions.
Margin calculatorUse this when asset cost or overhead assumptions feed into selling-price and profit-margin questions.
Margin formula notesSee the cost, revenue, profit, markup, and margin relationships.
ROI calculatorUse this when book-value timing is part of a broader return-on-investment comparison.
ROI formula notesReview gain, cost, ROI, and annualized-return formulas.
Payback period calculatorUse this when the question is how long cash flows take to recover an investment.
Payback period formula notesCompare depreciation timing with cash-flow recovery and discounted payback concepts.
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DisclaimerReview the limits of educational calculator estimates.