Depreciation Calculator

Depreciation is the systematic allocation of an asset's cost over its useful life. It reflects the decline in value due to wear, obsolescence, or passage of time. Depreciation is a non-cash expense that reduces taxable income.

Straight-line depreciation applies an equal amount each year. Declining balance applies a higher rate in early years and less later. Declining balance accelerates tax deductions, which is advantageous when you want larger deductions sooner.

Salvage value (residual value) is the estimated value of an asset at the end of its useful life. It's subtracted from cost to determine the total depreciation to be recognized. If an asset will be worthless, salvage value is zero.

Depreciation is a tax-deductible expense. It reduces taxable income without a cash outflow in the year claimed (since cash was already spent on purchase). Accelerated depreciation provides larger early deductions, improving cash flow.

Modified Accelerated Cost Recovery System (MACRS) is the IRS-required depreciation method for US tax purposes. It assigns assets to recovery classes (3, 5, 7, 15, 27.5, 39 years) with specific depreciation percentages per year.

Bonus depreciation allows businesses to immediately deduct a large percentage (historically 100%) of eligible asset costs in the first year. This is more aggressive than MACRS and is intended to incentivize capital investment.