Asset Depreciation Calculator

Depreciation is the systematic allocation of the cost of a fixed asset over its useful economic life. It allows businesses to match the cost of an asset against the revenue it generates, reducing taxable income each year.

Straight-line depreciation applies a constant annual charge. Double declining balance applies a fixed rate to the net book value, giving higher charges early and lower ones later. Accelerated methods are advantageous for tax purposes in the early years of an asset's life.

Salvage value is the estimated value of the asset at the end of its useful life — the amount expected from selling or scrapping it. It reduces the depreciable base under the straight-line method. A value of zero is commonly used for tax depreciation.

Depreciation charges are deducted from gross income to arrive at taxable income. Higher depreciation in earlier years reduces taxable income and therefore the tax liability in those years, improving cash flow. This is why accelerated methods are often preferred for tax purposes.

Rate = 2 / useful life. Each year: charge = net book value x rate. When the straight-line charge on the remaining depreciable balance exceeds the declining balance charge, the method switches to straight-line automatically. This ensures full depreciation by the end of the asset's life.

Under most accounting and tax regulations, once chosen, a depreciation method must be applied consistently for the life of the asset. Some jurisdictions allow a switch from declining balance to straight-line when it becomes more advantageous — the calculator models this automatic switch.

Cumulative depreciation is the total amount of depreciation charged from the start of the asset's life up to a given year. Net book value = Original cost - Cumulative depreciation. When cumulative depreciation equals the depreciable base, the asset is fully depreciated.

Tax depreciation is governed by tax law and used to calculate deductible expenses. Book (accounting) depreciation reflects the true economic consumption of the asset and may use different rates or methods. This calculator models the tax depreciation logic.

Fixed assets used in business for more than one year with a value above the low-value threshold can be depreciated. This includes machinery, vehicles, computers, furniture, and buildings. Land is not depreciated. Intangible assets such as patents and licences are amortised using similar principles.

Results are estimates for planning purposes only and do not constitute tax or accounting advice. Applicable depreciation rates and useful lives depend on local tax law and accounting standards. Please consult a qualified accountant or tax adviser for binding guidance.