A straight-line depreciation calculator spreads the cost of a business asset evenly across the years of its useful life. It answers the questions every bookkeeper and business owner faces at purchase time: how much value does this machine, vehicle, or computer lose on the books each year, and what will it be worth β on paper β at any point in the future?
Quick Answer
Annual Depreciation = (Asset Cost β Salvage Value) Γ· Useful Life. Equipment bought for $25,000, expected to be worth $3,000 at the end of an 11-year life, depreciates by ($25,000 β $3,000) Γ· 11 = $2,000 per year, every year, until its book value reaches the $3,000 salvage floor.
Why the Charge Is Spread Evenly
Depreciation is not a guess at resale prices; it is an accounting convention for matching the cost of a long-lived asset to the years that benefit from using it. Straight-line is the simplest version: the asset is assumed to deliver its service in equal slices, so it carries an equal slice of cost each year. The total amount available to spread β the depreciable base β is the purchase cost minus the salvage (residual) value, the amount expected to be recovered when the asset is sold or scrapped at the end. Dividing by useful life can also be expressed as a rate: an 11-year life means 100% Γ· 11 β 9.09% of the base charged per year.
Two running totals follow from the annual figure. Accumulated depreciation is the sum of all charges so far, and book value is cost minus accumulated depreciation β the number that appears on the balance sheet. Book value is an accounting figure, not a market quote: a well-maintained vehicle may sell for more than its book value, and obsolete electronics for far less.
How to Use the Straight-Line Depreciation Calculator
- Enter the asset's total cost β purchase price plus delivery, installation, and any setup needed to make it usable.
- Enter the salvage value you realistically expect at the end of its service (enter 0 if it will be worthless).
- Enter the useful life in years, using your accounting policy or the standard life for that asset class.
- Read the annual depreciation charge.
- Multiply the annual charge by any number of years to find accumulated depreciation, and subtract it from cost for the book value at that date.
- Repeat with a different life or salvage estimate if you are comparing purchase options.
Worked Example: A Delivery Van on the Books
Take the $25,000 machine above β cost $25,000, salvage $3,000, life 11 years, charge $2,000 per year. Its book value walks down in perfectly even steps:
- End of year 1: $25,000 β $2,000 = $23,000
- End of year 3: $25,000 β $6,000 = $19,000
- End of year 5: $25,000 β $10,000 = $15,000
- End of year 8: $25,000 β $16,000 = $9,000
- End of year 11: $25,000 β $22,000 = $3,000 (the salvage value β depreciation stops here)
That flat pattern is the whole point of the method: the profit-and-loss charge is identical in the asset's first year and its eleventh, which makes budgeting and year-to-year comparisons straightforward.
Not every asset has a meaningful salvage value or a long life, and the arithmetic stays just as obliging at the small end. A $1,800 laptop expected to be worthless after three years of service depreciates by ($1,800 β $0) Γ· 3 = $600 per year, reaching a book value of zero at the end of year three β after which it may well keep working for years as a fully depreciated asset, carried on the books at nothing while still in daily use. That outcome is normal, not an error: depreciation allocates a past cost, it does not track what the asset could be sold for today, and the day the laptop is finally sold for $100 the accounts record a small gain rather than an admission that the schedule was wrong.
One practical variant to be aware of is the part-year charge. Assets are rarely bought on the first day of the financial year, so many policies charge a proportion in year one β six months' worth for a June purchase in a January-to-December year, which on the $25,000 machine would be $1,000 rather than $2,000, with the remaining half-charge falling in year twelve. Others simplify with a full month's charge for any month the asset was owned. The calculator gives the full-year figure; apply your own convention's fraction to the first and final years when the purchase date demands it.
Where Straight-Line Answers Can Mislead
The method's simplicity is also its weakness. Many assets β vehicles and computers especially β lose real economic value fastest in their first years, so an even charge understates early wear; methods such as declining balance exist for that pattern. Second, the result is only as good as the two guesses inside it: pick too long a life or too high a salvage value and the annual charge is flattered. Third, land is not depreciated at all, since it is not used up β only the buildings on it are. Fourth, book depreciation and tax depreciation are separate systems in most countries: tax codes often prescribe their own lives and accelerated schedules, so the figure from this calculator belongs in management and financial accounts, not pasted directly into a tax return. Finally, if an asset is bought or sold mid-year, most policies apply a part-year convention rather than a full first-year charge.
This tool provides general-information estimates for accounting and planning. Depreciation policy affects reported profit and tax, so material figures should be confirmed with a qualified accountant familiar with your jurisdiction's rules.
Depreciation in the Bigger Asset Picture
If an even charge does not match how your asset wears out, the general Depreciation Calculator covers other patterns, and the Return on Assets Calculator shows why the shrinking book value matters: as assets depreciate, the same profit is earned from a smaller asset base. Both sit alongside this tool in the Business Calculators category.