A delivery van bought for $50,000 is not worth $50,000 five years later. Its value drains away with every mile, and depreciation is the accounting name for that drain, spread year by year across the asset’s working life.

The Annual Depreciation Calculator turns three inputs, the asset’s cost, its expected salvage value, and its useful life, into a full year-by-year depreciation schedule. You choose straight-line, declining-balance, or sum-of-years-digits, and the tool shows each year’s depreciation, the running accumulated total, and the remaining book value.

This guide explains all three methods, walks through five worked examples with matching numbers, and shows how to read the schedule the calculator produces.

What Does the Annual Depreciation Calculator Do?

You enter the asset cost, the salvage value you expect at the end of its life, and the useful life in whole years. Then you pick one of three depreciation methods from the dropdown.

The headline result is the first-year depreciation. For a $50,000 asset with a $5,000 salvage value and a 5-year life on straight-line, it reads: first-year depreciation (straight-line): $9,000.00.

Below the headline, a schedule lists every year with its depreciation amount, the accumulated depreciation so far, and the book value left at year end. A basis line notes that declining-balance uses double the straight-line rate and never depreciates below salvage value.

How to Use the Annual Depreciation Calculator

Type the full purchase cost of the asset into the first box, for example 50000. Include delivery and setup costs if they are part of what you paid.

Enter the salvage value, the amount you expect the asset to be worth when its useful life ends, for example 5000. Enter 0 if it will be worthless.

Enter the useful life in whole years, for example 5, and choose the depreciation method from the dropdown. Press Calculate to see the schedule, or Reset to start over.

What Depreciation Actually Measures

Depreciation matches an asset’s cost to the years that benefit from it. A $50,000 van used for five years did not cost $50,000 in year one and nothing after; it cost roughly $9,000 of value each year it ran.

The depreciable base is the cost minus the salvage value. On the $50,000 van with a $5,000 salvage value, the base is $45,000. That is the total amount all three methods spread across the five years.

Book value is the cost minus accumulated depreciation. It starts at $50,000 and falls each year, ending exactly at the $5,000 salvage value when the schedule is done.

Straight-Line Depreciation Explained

Straight-line is the simplest method: the same amount every year. The annual depreciation equals the depreciable base divided by the useful life.

The formula is:

D = (C – S) / n

For the $50,000 van: D = (50,000 – 5,000) / 5 = $9,000 per year. Year one shows $9,000 of depreciation and a $41,000 book value; year five shows $9,000 and a $5,000 book value.

Declining-Balance Depreciation Explained

Declining-balance front-loads the cost: bigger depreciation early, smaller later. Each year’s depreciation is the beginning book value times a fixed rate, and the calculator uses double the straight-line rate.

The formula is:

D = book value at start of year x (2 / n)

For the $50,000 van over 5 years, the rate is 2/5 = 40%. Year one is $50,000 x 0.40 = $20,000. Year two is $30,000 x 0.40 = $12,000. Year three is $7,200, year four $4,320.

Year five needs care: $6,480 x 0.40 = $2,592, but only $1,480 of depreciable value remains above the $5,000 salvage, so year five is capped at $1,480.

Sum-of-Years-Digits Depreciation Explained

Sum-of-years-digits is another front-loaded method. Add the digits of the life years: for 5 years, 1+2+3+4+5 = 15. Each year’s fraction is the remaining life over that sum.

The formula is:

D = (C – S) x (remaining years) / SYD

For the $50,000 van, the base is $45,000 and SYD is 15. Year one is $45,000 x 5/15 = $15,000. Year two is $45,000 x 4/15 = $12,000. Then $9,000, $6,000, and $3,000.

The five amounts add to exactly $45,000, the full depreciable base.

Why Book Value Can Never Drop Below Salvage

The salvage value is the floor. Depreciation stops there because the asset is assumed to still be worth that amount at the end, whether you sell it or keep using it.

On the declining-balance example above, the raw year-five figure of $2,592 would have pushed book value to $3,888, below the $5,000 salvage. The calculator caps it at $1,480 so the book value lands exactly on $5,000.

If an asset truly ends worthless, set salvage to 0. Then the full cost is the depreciable base and every method runs to zero.

Worked Example: $50,000 Asset, 5 Years, Straight-Line

Inputs: cost $50,000, salvage $5,000, life 5, straight-line. Step one: the depreciable base is 50,000 – 5,000 = $45,000.

Step two: annual depreciation is 45,000 / 5 = $9,000.00. Every year shows the same figure.

Step three: the schedule. Year 1: depreciation $9,000.00, accumulated $9,000.00, book value $41,000.00. Year 3: accumulated $27,000.00, book value $23,000.00. Year 5: accumulated $45,000.00, book value $5,000.00.

Worked Example: Same Asset, Declining-Balance

Inputs: cost $50,000, salvage $5,000, life 5, declining-balance. Step one: the rate is 2/5 = 40%.

Step two: apply the rate to each year’s starting book value. Year 1: $50,000 x 0.40 = $20,000.00, book value $30,000.00. Year 2: $30,000 x 0.40 = $12,000.00, book value $18,000.00.

Step three: year 3 gives $7,200.00 (book $10,800.00) and year 4 gives $4,320.00 (book $6,480.00). Year 5 is capped at $1,480.00 so the book value ends at $5,000.00.

The first-year depreciation is $20,000.00, more than double the straight-line figure. Front-loading concentrates the cost where the asset is newest.

Worked Example: Same Asset, Sum-of-Years-Digits

Inputs: cost $50,000, salvage $5,000, life 5, sum-of-years-digits. Step one: SYD is 1+2+3+4+5 = 15, and the base is $45,000.

Step two: year 1 is $45,000 x 5/15 = $15,000.00. Year 2 is $45,000 x 4/15 = $12,000.00. Year 3 is $9,000.00, year 4 $6,000.00, year 5 $3,000.00.

Step three: accumulated depreciation reaches $27,000.00 after year 2 and $45,000.00 after year 5, with book value ending at $5,000.00.

Worked Example: $24,000 Asset, 4 Years, Declining-Balance

Inputs: cost $24,000, salvage $4,000, life 4, declining-balance. Step one: the rate is 2/4 = 50%.

Step two: year 1 is $24,000 x 0.50 = $12,000.00, book value $12,000.00. Year 2 is $12,000 x 0.50 = $6,000.00, book value $6,000.00.

Step three: year 3’s raw figure is $3,000, but only $2,000 remains above the $4,000 salvage, so year 3 is $2,000.00 and book value hits $4,000.00. Year 4 is $0.00.

The first-year depreciation is $12,000.00. A zero year looks odd but is correct: the salvage floor was reached early, so nothing more can be depreciated.

Worked Example: $12,000 Asset, 4 Years, Sum-of-Years-Digits

Inputs: cost $12,000, salvage $2,000, life 4, sum-of-years-digits. Step one: SYD is 1+2+3+4 = 10, and the base is $10,000.

Step two: year 1 is $10,000 x 4/10 = $4,000.00. Year 2 is $3,000.00, year 3 $2,000.00, year 4 $1,000.00.

Step three: accumulated depreciation is $7,000.00 after year 2 and $10,000.00 after year 4, with book value ending at $2,000.00.

Common Depreciation Mistakes

The first mistake is depreciating the full cost instead of the base. The $50,000 van’s total depreciation is $45,000, not $50,000, because the $5,000 salvage value is never depreciated.

The second mistake is letting book value fall below salvage on declining-balance. The rate keeps applying to a shrinking book value, so the schedule needs the cap the calculator applies automatically.

The third mistake is mixing methods mid-schedule without reason. Each method answers a different question about how value drains; switching halfway muddles the comparison.

The fourth mistake is confusing book depreciation with tax depreciation. Tax rules like MACRS use their own lives and conventions, so a book schedule is for planning and study, not the tax return.

How to Interpret Your Result

Start with the first-year depreciation headline. That is the biggest number on front-loaded methods and the every-year number on straight-line, and it sets the tone of the whole schedule.

Scan the book value column for the glide path. A smooth landing on the salvage value in the final year means the schedule is consistent; a sudden drop or a zero year means the salvage floor was hit early.

Compare methods on the same asset before choosing one. The $50,000 van’s first year is $9,000 straight-line, $20,000 declining-balance, or $15,000 sum-of-years-digits, and the right pick depends on how the asset actually loses value.

Where Depreciation Math Is Useful

Small business owners use it to plan equipment replacement. A schedule shows when an asset’s book value nears salvage, which is often the economical moment to replace it.

Buyers use it to judge used-asset prices. If a three-year-old machine’s book value is far above its market price, the seller’s asking price may be optimistic.

Students use it to master the three methods side by side. Running the same inputs through each method, as the examples above do, makes the differences concrete.

Frequently Asked Questions

1. What is the first-year depreciation on a $50,000 asset with a $5,000 salvage value over 5 years?

It depends on the method. Straight-line gives $9,000.00, declining-balance gives $20,000.00, and sum-of-years-digits gives $15,000.00. All three spread the same $45,000 depreciable base across five years.

2. How is straight-line depreciation calculated?

The formula is D = (C – S) / n, where C is cost, S is salvage value, and n is the useful life in years. For the $50,000 van: (50,000 – 5,000) / 5 = $9,000 every year.

3. How is declining-balance depreciation calculated?

Each year’s depreciation is the beginning book value times 2 / n. For the $50,000 van over 5 years the rate is 40%, so year 1 is $20,000, year 2 is $12,000, year 3 is $7,200, and year 4 is $4,320. The result never goes below salvage value.

4. How is sum-of-years-digits depreciation calculated?

Add the life’s digits for SYD: for 5 years, 15. Each year’s depreciation is (C – S) times remaining years over SYD. For the $50,000 van: $45,000 x 5/15 = $15,000 in year 1, then $12,000, $9,000, $6,000, and $3,000.

5. Why is year 5 of declining-balance only $1,480 instead of $2,592?

Because the raw figure would push book value below the $5,000 salvage value. Only $1,480 of depreciable value remains above salvage after year 4, so the calculator caps year 5 at $1,480 and the book value lands exactly on $5,000.

6. Can a year show $0 depreciation?

Yes. On the $24,000 asset with a $4,000 salvage value over 4 years at declining-balance, the schedule is $12,000, $6,000, $2,000, and $0. The salvage floor was reached in year 3, so year 4 has nothing left to depreciate.

7. What is the depreciable base?

The cost minus the salvage value. On the $50,000 van with a $5,000 salvage value, the base is $45,000. Every method’s yearly amounts add up to exactly this base over the full life.

8. What is book value?

The cost minus accumulated depreciation. The $50,000 van starts with a $50,000 book value, and after year 1 on straight-line it is $41,000. Book value ends at the salvage value when the schedule completes.

9. Which method should I choose?

Use straight-line for assets that wear evenly, like furniture. Use declining-balance or sum-of-years-digits for assets that lose value fastest when new, like vehicles and computers. The calculator lets you compare all three on the same inputs.

10. Does the calculator handle tax depreciation like MACRS?

No. It calculates book depreciation with three classic methods. Tax depreciation follows rules like MACRS with prescribed lives and conventions that differ from these methods, so confirm tax figures with an accountant.

11. What if the salvage value is 0?

Then the full cost is the depreciable base. A $50,000 asset with $0 salvage over 5 years gives $10,000 a year on straight-line, and every method runs the book value down to exactly $0.

12. Why must salvage be less than cost?

Because the depreciable base is cost minus salvage, and a salvage at or above cost would mean zero or negative depreciation. The calculator shows an error if you enter a salvage value equal to or greater than the cost.

13. How do the three methods compare on the same asset?

On the $50,000 van over 5 years: straight-line is $9,000 every year; declining-balance is $20,000, $12,000, $7,200, $4,320, $1,480; sum-of-years-digits is $15,000, $12,000, $9,000, $6,000, $3,000. All three total $45,000.

14. What is accumulated depreciation?

The running total of depreciation charged so far. On the straight-line $50,000 example it is $9,000 after year 1, $27,000 after year 3, and $45,000 after year 5. Book value is the cost minus this total.

15. Can I use this for a house or land?

Buildings can be depreciated, but land cannot, because land does not wear out. Enter only the building’s cost and a sensible useful life. The calculator’s methods are for study and planning; real-estate tax depreciation follows its own rules.