Depreciation Calculator

Straight-line depreciation spreads the cost of an asset evenly across the years it is expected to be used. The calculation is short: subtract the salvage value expected at the end of that period from the purchase cost, then divide by the number of years. What remains after the subtraction is the depreciable base, and it is that figure rather than the purchase price which gets allocated. The method suits assets that deliver roughly even service over their life, which covers most equipment, fixtures and fittings.

The loaded figures work through in one line. A 10,000 asset with a 1,000 salvage value over five years has a depreciable base of 9,000, so annual depreciation is 1,800 and the monthly figure is 150. Over the five years the full 9,000 is written off, leaving the asset carried at its 1,000 salvage value. Where an accounting or tax system allows the charge to reduce taxable profit, the value of that is the annual figure multiplied by the applicable rate: at a 20% rate the 1,800 charge is worth 360 a year, or 1,800 across the five years, which brings the cost net of tax relief to 8,200 before any salvage proceeds are counted.

Straight-line is one of several allocation patterns. Declining balance charges more in the early years and less later, which fits assets that lose value fastest when new. Units of production ties the charge to actual usage rather than to elapsed time, which suits machinery whose life is measured in output. Various tax systems define their own recovery periods and rates that override the accounting method entirely for tax purposes. This calculator implements the straight-line method only, so a different pattern needs a different model.

Run it with sensible defaults

Asset cost of 10,000 with a salvage value of 1,000 over a five-year useful life gives a depreciable base of 9,000, annual depreciation of 1,800 and a monthly charge of 150.

Changing one input at a time shows the range. Dropping the salvage value to zero raises the annual charge to 2,000, and raising it to 5,000 halves the charge to 1,000. Shortening the life to three years raises it to 3,000; extending it to ten years drops it to 900. The depreciable base stays at 9,000 in both of those, because life changes how the base is spread rather than how large it is.

The levers in this calculation

Asset Cost is the larger lever: a 1% change in it moves annual depreciation by 1.11%, against 0.11% for Salvage Value in the opposite direction. The asymmetry is simply the size of the two figures, since a 1% move on 10,000 is ten times a 1% move on 1,000, and both pass through the same divisor. Useful Life moves the result the other way, and a 1% increase reduces the annual charge by about 0.99%.

One boundary is worth knowing. The tool applies no guard requiring salvage to sit below cost, so entering a salvage value above the asset cost produces a negative depreciable base and a negative annual charge. That is arithmetically consistent but not a depreciation figure, and it usually indicates the two inputs have been transposed.

How the math works

The depreciable base is cost less salvage value. Annual depreciation is that base divided by the useful life in years. The monthly figure divides the annual one by twelve.

Two assumptions sit behind the simplicity. The salvage value and the useful life are both estimates made at the start and held fixed for the whole period, whereas accounting standards generally expect both to be reviewed and revised where circumstances change, which alters the charge from that point forward rather than restating earlier years. And the monthly figure divides evenly across twelve months regardless of when in the year the asset was acquired, so a mid-year purchase carries a smaller first-year charge in practice than a full twelve months at this rate.