Depreciation allocates the cost of a long-lived asset over its useful life (ASC 360). Enter cost, salvage value and life to generate a complete schedule under five methods, including MACRS for U.S. tax depreciation.
How it works
Build a full depreciation schedule under straight-line, double-declining balance, sum-of-the-years’-digits, units-of-production or MACRS (GDS, half-year).
Straight-line = (Cost − Salvage) ÷ Life
DDB = Book value × 2 ÷ Life (switch to SL when larger)
SYD = (Cost − Salvage) × Remaining life ÷ [n(n + 1) ÷ 2]
Units of production = (Cost − Salvage) × Units this year ÷ Total units
MACRS = Cost × IRS table rate (GDS, half-year convention)Common uses
- Fixed asset schedules and month-end entries
- Book versus tax depreciation comparisons
- Capital budgeting tax shields
Worked example
The calculator above opens with this example. Change any input to see the results update instantly, or select Reset to return to these figures.
| Asset cost | $125,000 |
| Salvage value | $10,000 |
| Useful life | 7 years |
| Method | Double-declining balance |
| First fiscal year | 2,026 |
| Year-1 depreciation | $35,714.29 |
| Depreciable base | $115,000 |
| Total depreciation | $115,000 |
| Method | Double-declining |
Declining balance switches to straight-line when that yields a larger charge, and never depreciates below salvage.
Interpreting the results
- Book depreciation (GAAP, ASC 360) and tax depreciation (MACRS) usually differ, creating deferred taxes.
- Schedules use full-year amounts; prorate the first and last years for mid-year acquisitions under your policy.
- Bonus depreciation and Section 179 expensing are not modeled.
Frequently asked questions
Which depreciation method should I use for book purposes?
Straight-line is the most common for financial reporting because it matches cost to periods of roughly equal benefit. Accelerated methods suit assets that lose productivity or value faster in early years; the method should reflect the pattern of consumption.
How does double-declining balance handle salvage value?
Double-declining balance applies twice the straight-line rate to the opening net book value and ignores salvage in the rate. Depreciation stops once net book value reaches salvage, and many schedules switch to straight-line when that produces a higher charge.
When does MACRS apply?
MACRS is the required method for most tangible property for U.S. federal income tax purposes. It uses IRS recovery periods and percentage tables and ignores salvage value, so it usually differs from book depreciation and creates a deferred tax difference.
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