Build depreciation schedules using straight line, declining balance, SYD or units of production.
Depreciation allocates an asset's cost over its useful life. Straight-line (SL) deducts equal amounts every year. Double-declining balance (DDB) deducts a fixed percentage of the remaining book value — highest in early years, tapering off. Sum-of-years-digits (SYD) front-loads deductions using a fraction that decreases each year. Units-of-production ties the annual charge to actual usage, useful for machinery with measurable output. All methods ultimately depreciate the asset to salvage value; they differ only in timing.
Straight-Line
Annual depreciation = (Cost − Salvage) / Useful life
Double-Declining Balance
Depreciation = Beginning book value × (factor / life), capped at (book value − salvage)
Sum-of-Years-Digits
Depreciation = Depreciable base × (remaining life / sum of years)
Units of Production
Depreciation = Depreciable base × (units this year / total lifetime units)
Declining balance is preferred when an asset generates more revenue or has higher maintenance costs early in its life — technology hardware, vehicles, and heavy equipment are common examples. Front-loading the deduction also has a time-value-of-money benefit: earlier deductions save taxes sooner.
DDB's formula never reaches the salvage value on its own — it approaches it asymptotically. In practice (and under MACRS rules), companies switch to SL when SL would give a larger deduction, ensuring the asset is fully depreciated. This calculator caps depreciation so the book value never drops below salvage, which has the same effect.
SYD stands for sum-of-years-digits. For a 5-year asset the sum is 1+2+3+4+5=15. Year 1 gets 5/15, year 2 gets 4/15, and so on. It front-loads deductions like DDB but follows a straight-line trajectory downward rather than an exponential one. It's less common today but was widely used before MACRS.
The depreciable base is cost minus salvage value — the total amount to be expensed over the asset's life. Salvage value represents what the asset is expected to be worth when you're done with it. You never depreciate below salvage value.