Depreciation Calculator

What a depreciation schedule does

Depreciation spreads the cost of something you will use for years across those years, instead of charging the whole purchase to the month you paid for it. Three inputs drive every schedule on this page: what the asset cost, what it will be worth when you are done with it (salvage value), and how many years you will use it.

The output is bookkeeping, not a forecast. A $12,000 machine does not lose exactly $2,000 of value in each of five years; the used market decides that. The schedule exists so one year's profit can be compared with the next year's without a single large purchase landing on one month.

The same purchase also has a tax life, and Congress sets that one. Book schedules are chosen by the owner, tax schedules are chosen by the Internal Revenue Code, and the two rarely agree. This page runs both and shows where they part.

The four rows describe one asset and four defensible answers, which is why a schedule has to name its method before any number means anything.

Straight line, year by year

Straight line is the default in most small business books. Subtract the salvage value from the cost, then divide by the number of years: yearly depreciation = (cost - salvage) / years. For a $12,000 machine with $2,000 of expected salvage over five years, (12,000 - 2,000) / 5 = 2,000 a year, and 2,000 / 12 = 166.67 a month.

Book value is cost minus accumulated depreciation, so it ends at the salvage estimate rather than at zero. Sell the asset for $3,500 in year 4 and the books show a $500 gain, because the carrying value was $4,000. None of that appears in the yearly expense; the gain lands in the year of the sale.

The weakness is the straight line itself. A laptop is worth little after two years and a desk still sells after ten, yet a five-year average treats both the same. That mismatch is the reason the accelerated methods below exist, and the reason the tax code does not use straight line for equipment.

Double declining balance and the salvage floor

Double declining balance applies twice the straight-line rate to whatever book value is left, so the deduction shrinks every year. For a five-year life the rate is 2 / 5 = 40%: 12,000 x 40% = 4,800 in year one, then 7,200 x 40% = 2,880, then 4,320 x 40% = 1,728.

Year four is where the rule bites. The 40% rate would take 2,592 x 40% = 1,036.80, which would push the book value to 1,555.20, below the $2,000 salvage estimate. This calculator stops at salvage and takes only 592, which leaves nothing for year five. Total deductions over the life are 10,000, the same as straight line, just moved earlier.

Set salvage to zero and the tail becomes visible: 4,800, 2,880, 1,728, 1,036.80 and 622.08 add up to 11,066.88, so 933.12 of the cost is never expensed. Accounting software fixes that by switching to straight line over the remaining years, which is what the IRS 200% declining balance tables do inside their published percentages. The calculator here does not switch, so the closing book value and the remaining balance are shown on separate lines instead of being hidden.

MACRS: the percentages the IRS hands you

Modified Accelerated Cost Recovery System is the tax schedule for most business equipment in the United States. Instead of a formula, Publication 946 publishes tables of percentages. Under the general depreciation system with the half-year convention, the 5-year column runs 20.00, 32.00, 19.20, 11.52, 11.52 and 5.76 percent, and those six figures add to 100 percent of the basis.

The half-year convention is why 5-year property takes six tax years and 7-year property takes eight. The IRS treats everything placed in service during the year as if it went into use at midyear, so year one gets half a year of depreciation and the other half shows up at the end of the schedule.

Two things move the percentages. The mid-quarter convention applies when the depreciable basis placed in service in the last three months of the year is more than 40 percent of the basis placed in service all year, and then Tables A-2 through A-5 replace Table A-1 for every asset bought that year, not just the fourth-quarter ones. The alternative depreciation system replaces them too, spreading the same basis evenly over a longer life when the property is used outside the United States or when the taxpayer elects out of the accelerated tables. The IRS Publication 946 holds all of the tables.

Section 179 and bonus depreciation for 2026

Two elections can skip the schedule entirely for qualified property. Section 179 lets a business deduct the cost of qualifying equipment in the year it is placed in service, and the 2026 dollar limit is $2,560,000, reduced dollar for dollar by the cost of section 179 property placed in service above $4,090,000. Both figures come from IRS Revenue Procedure 2025-32 and apply to tax years beginning in 2026. The sport utility vehicle cap for the same year is $32,000.

The phase-out is gradual, not a cliff. A business that places $4,150,000 of equipment in service in 2026 is $60,000 over the threshold, so the section 179 limit falls to 2,560,000 - 60,000 = 2,500,000. Above that the deduction is also capped by taxable income from the active conduct of the business, and anything disallowed carries forward.

Bonus depreciation is the other route. The One Big Beautiful Bill Act, Public Law 119-21, restored a 100 percent first-year allowance for qualified property acquired and placed in service after January 19, 2025, so a $50,000 machine bought in 2026 can be written off in 2026 with no schedule at all. Property acquired on or before that date still follows the older phase-down, which is 40 percent for 2025, and a taxpayer can elect 40 percent on the newer property in the first tax year ending after January 19, 2025 instead of 100 percent.

Book depreciation against tax depreciation

Most businesses keep two sets of numbers. The book schedule is the owner's estimate of how the asset is used up, and straight line is common because it matches the benefit to the years that receive it. The tax schedule is the fastest method the law allows, because a deduction taken earlier is worth more than the same deduction taken later.

The gap between the two is not an error, it is a timing difference. Front-load the tax deduction and the early years show lower taxable profit, then the later years show higher profit once the tax schedule runs out while the book schedule keeps going. A company reporting to lenders or investors records the difference as a deferred tax item rather than letting it distort the reported result.

Depreciation also comes back at the end. Every dollar deducted lowers the basis of the asset, so a sale above that basis produces a taxable gain, and the part of the gain equal to depreciation taken is usually taxed at ordinary rates rather than capital gains rates. Section 179 has its own clawback: drop business use of the property to 50 percent or less before the recovery period ends and part of the deduction is recaptured as income.

For a vehicle, the resale question is a different one. The car depreciation calculator projects what a car will be worth after a few years using market drop curves, which is a forecast. This page builds a fixed accounting schedule from cost, salvage and life, which is a ledger entry. Same word, different output, and a resale estimate is not a substitute for a Form 4562.

Where a depreciation schedule goes wrong

Land cannot be depreciated, so a property purchase has to be split between the building and the ground before any schedule starts. Allocating the whole price to the building inflates the deduction and is one of the first things an examination checks.

Repairs and improvements land in different places. Replacing a broken belt keeps the asset running and is expensed now; replacing the motor with a larger one extends the life and belongs in the basis, where it is depreciated over the remaining years. The line between the two is judgment, and the safe harbor for small taxpayers exists precisely because that judgment is contested.

Timing catches people in the fourth quarter. A business that buys one machine in December for $6,000 and nothing else all year has placed 100 percent of its basis in the last three months, so the mid-quarter convention applies and the first-year deduction is a fraction of what the half-year table would give. Buy the same machine in June and the half-year table applies.

Finally, partial business use. A truck driven 60 percent for work depreciates on 60 percent of its basis, and the personal share never becomes deductible later. The calculator takes the full cost, so scale the answer by the business-use percentage before it goes on a return.