Straight-Line Depreciation Calculator

What the straight-line depreciation calculator does

The straight-line depreciation calculator works out how much of a fixed asset's cost to expense each year across its useful life. You enter the purchase cost, the salvage value you expect at the end, and the number of years the asset will be used. The tool returns the annual depreciation charge, the total depreciable base, and the book value that remains after the first year.

A business rarely writes off the full cost of equipment, vehicles, or machinery in the year it is bought. The cost is matched against the periods that benefit from using the asset, and straight-line is the simplest way to do that for accounts, budgets, or a business plan.

How straight-line depreciation works

The method assumes the asset delivers roughly the same value every year, so it carries the same expense every year. First you find the depreciable base: the asset cost minus the salvage value. The salvage value is what you expect the asset to be worth when you are finished with it, and because you expect to keep or recover that amount, it is never depreciated.

Dividing the depreciable base by the useful life in years gives the annual depreciation charge, which stays the same for every year of the asset's life. The book value starts at the full cost and steps down by the annual charge each year until it lands exactly on the salvage value at the end of the term.

Because the charge is constant, straight-line is easy to forecast and easy to audit; anyone reading the accounts can see how the expense was calculated and how the book value will fall.

The three inputs

• Asset cost is the full amount paid to acquire the asset and make it ready for use, including delivery and setup where relevant. A higher cost raises the depreciable base and the annual charge.
• A higher salvage value shrinks the depreciable base, because more of the original cost is expected to remain at the end. Setting salvage to zero depreciates the entire cost.
• Spreading the same base over more years of useful life lowers each year's charge, and fewer years raise it. The useful life should reflect how long the asset will realistically serve the business.

Reading the results

The annual charge is the expense to budget for each year, the depreciable base is the total that will pass through the accounts, and the book value shows what the asset is carried at on the balance sheet. The chart traces how the book value declines year by year.

Straight-line versus accelerated methods

Straight-line suits assets that wear out evenly, such as buildings, fixtures, and office furniture, where each year of use is broadly similar to the last.

Accelerated methods, such as double-declining-balance or sum-of-the-years'-digits, front-load the expense so that more depreciation is recorded in the early years. They suit assets that lose value quickly at first, such as vehicles, computers, and other technology. For those, compare the first-year charge under each method before committing, because the choice affects reported profit and, in some jurisdictions, tax.

Common mistakes

• Leaving setup costs out of the asset cost. Delivery, installation, and commissioning are usually part of the cost that should be depreciated, not separate expenses.
• Setting the salvage value to zero out of habit. If an asset has real resale value, ignoring it overstates the annual charge and understates profit.
• Choosing an unrealistic useful life. Too short a life inflates the yearly expense; too long a life leaves the asset on the books after it has stopped being useful.

A depreciation schedule tells you how much expense to expect each year, helps you time replacements before an asset is fully written down, and feeds into cash-flow and budget forecasts. Revisit the assumptions if the expected life or salvage value changes.

This article is general information only and is not accounting or tax advice.

About This Straight-Line Depreciation Calculator

Use this straight-line depreciation calculator to get an instant estimate based on the figures you enter. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.