Depreciation Calculator
Compare every depreciation method on the same asset, and see that while the total written off never changes, the present value of the tax shield does.
Depreciation Calculator
Results recalculate instantly on every keystroke. Nothing you type is transmitted.
What this result does not account for
- Uses annual periods without part-year or mid-year conventions.
- Tax rules frequently mandate specific methods and lives that override the economic choice.
- Assumes a single tax rate across the whole life of the asset.
In short: A $540,000 asset with $60,000 salvage over five years writes off $480,000 under every method. Double declining front-loads it, making the tax shield worth $82,592.39 today against $74,509.28 for straight line — $8,083.10 purely from timing.
Formula
Every method has the same numerator and the same total. They differ only in how that total is distributed across the years.
Worked Example
- Find the depreciable base. $540,000 cost less $60,000 salvage is $480,000. This is what every method must write off, no more and no less.
- Compare the year-one charges. Straight line $96,000; declining balance $216,000; sum of years $160,000; units of production $120,000 at 150,000 of 600,000 units.
- Confirm the totals match. All four write off $480,000 in full, producing $100,800 of tax relief at 21% regardless of method chosen.
- Discount the relief. At 11%, straight line relief is worth $74,509.28 today; declining balance is worth $82,592.39.
- Price the timing. $8,083.10, or 10.85%, comes purely from taking the same deduction earlier. Nothing about the asset changed.
The single most common misunderstanding about depreciation is that an accelerated method saves tax. It does not. Every method deducts exactly $480,000 over the asset's life and every method produces exactly $100,800 of relief at a 21% rate. What acceleration changes is when that relief arrives, and because money has a time value, arriving earlier is worth something: $8,083.10 here, or 10.85% of the shield. That is a genuine benefit and it is worth pursuing, but it is a financing benefit rather than a tax saving. The distinction matters when someone proposes changing method to improve reported profitability, because the same acceleration that helps cash flow depresses early earnings.
Strengths & Limits Of This Model
Where this engine is strong
- Compares all four methods on one asset with identical inputs.
- Prices acceleration by discounting the tax shield rather than asserting a benefit.
- Applies both the salvage floor and the straight line switch to declining balance.
Where it stops
- Does not print a full year-by-year schedule; the dedicated pages do.
- Cannot model bonus depreciation or first-year expensing allowances.
Practical Use Cases
Choosing a method for a new capital purchase
Accelerated methods suit assets that lose value fastest when new. Straight line suits even wear and steadier reported earnings.
Quantifying the cash benefit of accelerated tax depreciation
The present value difference is the whole benefit. At an 11% discount rate it is 10.85% of the shield here.
Explaining why profit fell after a large purchase
Front-loaded depreciation depresses early profit without consuming cash. Trace it through with the Cash Flow Calculator.
Setting a replacement budget
Depreciation approximates maintenance capital spending. Compare the two with the EBITDA Margin Calculator.
Methodology & Editorial Standards
The engine computes all four conventional depreciation methods on a single asset so they can be compared directly. Straight line divides the depreciable base evenly across the useful life; declining balance applies a fixed multiple of the straight line rate to the reducing book value; sum of years digits weights each year by its remaining life over the sum of the digits; and units of production allocates by actual output rather than elapsed time. The depreciable base is cost less salvage in every case, which is why the total written off is identical regardless of method — a point the engine states explicitly, because the belief that accelerated depreciation reduces total tax is the most persistent misconception in the subject. What differs is timing, and the engine prices that difference by discounting each method's tax shield at a user-supplied rate; the resulting gap is the entire economic value of acceleration and it is a financing benefit rather than a tax saving. Declining balance is implemented with both conventional guards: the charge is floored so book value never falls below salvage, and the method switches to straight line on the remaining balance once that produces the larger deduction, as required for the asset to be fully depreciated by the end of its life. The engine implements the standard published formula for this calculation. Inputs are validated for domain and sign before evaluation, and any undefined case returns an em-dash rather than a spurious value.
Computation runs in IEEE-754 double precision at full internal precision; rounding to two decimal places occurs strictly at the display layer, so no cumulative drift enters the result. All monetary outputs use accounting presentation — grouped thousands, two decimals, negatives in parentheses — so figures can be transcribed directly into a model or working paper. Division-by-zero and out-of-domain inputs return an em-dash rather than a misleading number.
This engine was reconciled against an independent reference implementation and hand-verified for the worked example above before release. Our full five-stage review process is published on the About Us page.
Disclaimer. This calculator is provided for informational and modelling purposes only and does not constitute financial, tax, legal, medical, or engineering advice. Verify all figures with a qualified professional before acting on them.
Depreciation Calculator — 20 Expert FAQs
20 analyst-written answers to the questions practitioners actually ask — optimised for voice and answer-engine retrieval.
Does accelerated depreciation save tax?
No. Every method deducts the same $480,000 and produces the same $100,800 of relief. Acceleration changes when, not how much.
What is the depreciable base?
Cost less salvage value — $480,000 here. Every method must write off exactly this amount over the asset's life.
Which method gives the biggest first-year deduction?
Double declining balance at $216,000, followed by sum of years at $160,000, then units at $120,000 and straight line at $96,000.
What is acceleration actually worth?
The present value difference — $8,083.10 here, or 10.85% of the shield at an 11% discount rate.
Can I use different methods for tax and accounts?
Yes, and most businesses do. Tax rules often mandate a specific method regardless of the accounting treatment.
What is salvage value?
The estimated residual worth at the end of useful life. It reduces the depreciable base and is frequently estimated at zero for simplicity.
How is useful life determined?
By expected economic use, not physical life. Tax codes often prescribe specific lives that differ from the accounting estimate.
What is sum of years digits?
A milder acceleration weighting each year by remaining life. With a five-year asset the digits sum to 15, so year one takes 5/15.
When is units of production appropriate?
When wear tracks output rather than time — machinery, vehicles and extraction assets. It matches expense to actual use.
Why does profit fall after a big purchase?
Because depreciation begins immediately while the revenue benefit builds slowly. Front-loaded methods make the effect sharper.
Is depreciation a cash expense?
No. It allocates a past cash outflow across periods, which is why it is added back when calculating operating cash flow.
Should salvage be deducted under declining balance?
Not from the calculation base, but the charge must stop once book value reaches salvage. The engine applies that floor.
What is the half-year convention?
A tax rule treating assets as acquired mid-year, giving half a year's depreciation in the first and last years regardless of purchase date.
Does depreciation affect EBITDA?
No — EBITDA is defined before depreciation and amortisation. That is precisely why it is used to compare businesses with different asset bases.
What happens if I sell before full depreciation?
The difference between proceeds and net book value is a gain or loss on disposal, which is taxable or deductible in that period.
Can depreciation be changed once chosen?
Changing method is a change in accounting estimate requiring disclosure, and it is scrutinised because it directly moves reported profit.
Is this depreciation calculator free to use?
Yes. It is free, requires no account, and has no usage limits. ApexConverter is funded by contextual advertising, never by selling user data.
Is my data sent to a server?
No. The engine runs as Vanilla JavaScript inside your browser under our Zero-Server Client-Side Execution model. Your figures are computed locally and are never transmitted, logged, or stored.
How accurate is this calculator?
It applies the standard closed-form formula in IEEE-754 double precision, rounding only at the display layer. The engine is reconciled against an independent reference implementation before release.
Does it work on mobile?
Yes. The interface is mobile-first with numeric keypad hints and is tested down to a 320-pixel viewport with no horizontal scrolling.