Depreciation Calculator

Depreciation spreads the cost of a tangible asset (machinery, vehicles, equipment, buildings) over its useful life rather than expensing it all in the year of purchase. It matches the cost of using the asset to the periods it actually generates revenue.

Straight-line is the standard for financial reporting (GAAP). MACRS (Modified Accelerated Cost Recovery System) is required for U.S. federal income tax on most business property placed in service after 1986. Many companies maintain both books for these reasons.

Under MACRS, you generally treat property as placed in service mid-year regardless of when in the year you actually bought it. This is why the first and last years of the MACRS table show partial amounts. There are also mid-quarter and mid-month conventions for specific situations.

IRS Publication 946 lists asset classes. Common ones: 3-year (special tools, racehorses), 5-year (computers, vehicles, office equipment), 7-year (office furniture, fixtures), 15-year (land improvements like fences and parking lots), 27.5-year (residential rental real estate), 39-year (nonresidential real property).

Section 179 and bonus depreciation let businesses immediately expense some or all of an asset cost in year one, instead of spreading it over time. They sit on top of MACRS and have annual dollar limits and phase-outs that this calculator does not model. Talk to a CPA before claiming them.

DDB depreciates faster early on but eventually a straight-line write-off of the remaining book value over the remaining life produces a larger annual amount. Standard practice is to switch to straight-line in that year, which this calculator handles automatically.