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Estimate annual and accumulated depreciation of assets.
Save this page to track asset write-offs and plan tax depreciation schedules.
Annual depreciation
$1,800
Summary
Annual Depreciation Expense
$1,800
Depreciable Cost Base
$9,000
Residual Salvage Value
$1,000
Useful Life Years
5 yrs
D3 visualization
Compare the asset salvage value with the total depreciable base cost.
D3 visualization
Straight-line annual depreciation expense compared to the total depreciable base.
Guide
Depreciation is an accounting method that allocates the cost of a tangible asset over its useful life. This matches the asset cost with revenue generated by its use, preventing large capital expenses from distorting income statements in a single year.
Straight-line depreciation is the simplest and most common method. It assumes the asset loses value at an equal rate each year: subtracting salvage value from initial cost, then dividing by estimated useful years.
Depreciable base
The cost of an asset that is depreciated, calculated as initial value minus salvage value.
Straight-line depreciation
The method of allocating cost evenly across all years of useful life.
Salvage value (or residual value) is the estimated book value of an asset at the end of its useful life, representing what it can be sold for or scrapped for when retired.
Useful life is the estimated time period that an asset remains productive and usable for business operations. Tax departments (such as the IRS) dictate standard useful lives for different asset classes.
Formula
Annual depreciation = (initial value - salvage value) / useful lifeStraight-line depreciation spreads the depreciable asset cost evenly over its useful life.
Step by step
Example
A $10,000 asset with $1,000 salvage value over 5 years depreciates by $1,800 per year.
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