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Calculate depreciation with straight-line, DDB, SYD, and MACRS methods. Full schedule included.
Depreciation is the systematic allocation of an asset's cost over its useful life. Common methods include straight-line (equal annual amounts), double declining balance (accelerated), and sum-of-years-digits (accelerated).
| Class | Examples |
|---|---|
| 3-Year | Racehorses, small tools |
| 5-Year | Cars, computers, copiers |
| 7-Year | Office furniture, machinery |
| 15-Year | Land improvements, fencing |
| 27.5-Year | Residential rental property |
| 39-Year | Commercial real estate |
Source: IRS Publication 946
Formula
Straight-Line: Depreciation = (Cost − Salvage Value) ÷ Useful Life | DDB: Depreciation = (2 ÷ Useful Life) × Book ValueCost = Original purchase price of the asset
Salvage Value = Estimated residual value at end of useful life
Useful Life = Number of years the asset will be in productive use
Book Value = Asset cost minus accumulated depreciation to date
Worked Example
$50,000 asset, $5,000 salvage, 5-year life
Did you know? Under IRS Section 179, businesses can deduct up to $1,160,000 of qualifying equipment costs in the year of purchase (2023 limit), rather than depreciating over years. The phase-out begins at $2,890,000 of total asset purchases (source: IRS Publication 946, How to Depreciate Property).
Sources
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