Depreciation Calculator

Initial Value

Annual Rate %

Years

Value After Depreciation

14,467.90

Total Depreciation Amount

17,532.10

At 18.00% per year, 32,000.00 declines to 14,467.90 after 4.00 years.

Formula

Value = Initial × (1 − Rate ÷ 100)^Years

Depreciation is a scheduled, rate-based projection of how an asset's value declines over time, compounding a fixed annual percentage across however many years are entered. It's forward-looking, unlike a simple one-time comparison between two already-known values.

Accountants, asset managers, and anyone planning a large purchase use depreciation schedules to budget for eventual replacement, estimate resale value years in advance, and, where applicable, calculate a tax deduction for the asset's declining value each year.

Declining Balance Depreciation Formula

Formula

Value = Initial × (1 − Rate ÷ 100)^Years

Each year applies the same rate to the previous year's already-reduced value, compounding rather than subtracting a flat amount, the same compounding shape used by CAGR, run in reverse.

How to Calculate Declining Balance Depreciation

Convert the annual rate to a multiplier
Raise the multiplier to the power of the number of years
Multiply by the initial value
Subtract from the initial value for total depreciation

Most accounting software and tax authorities publish standard depreciation rates by asset category, so in practice the rate is often looked up rather than estimated. This calculator is most useful for checking that a provided rate produces the expected result.

Depreciation Examples

Example 1, Vehicle, $32,000 at 18% per year for 4 years

$14,467.90

Convert to a multiplier 1 − 0.18 = 0.82
Raise to the power of years 0.82^4 = 0.452122…
Multiply by the initial value 32,000 × 0.452122… = $14,467.90
Total depreciation 32,000 − 14,467.90 = $17,532.10

A $32,000 vehicle depreciating 18% per year is worth $14,467.90 after 4 years, having lost $17,532.10 in value.

Example 2, Equipment, $15,000 at 25% per year for 3 years

$6,328.13

Convert to a multiplier 1 − 0.25 = 0.75
Raise to the power of years 0.75^3 = 0.421875
Multiply by the initial value 15,000 × 0.421875 = $6,328.13
Total depreciation 15,000 − 6,328.13 = $8,671.88

A $15,000 piece of equipment depreciating 25% per year is worth $6,328.13 after 3 years.

Relationship to Percentage Decrease

Depreciation is percentage decrease applied repeatedly and compounded, the same (1 − rate ÷ 100) multiplier used in a single decrease calculation, raised to a power to apply it across multiple years at once. For a one-time comparison between a known purchase price and a known current value, with no schedule involved, see the value loss calculator instead.

Where Depreciation Shows Up

Vehicle Fleet Accounting

Businesses with vehicle fleets project depreciation schedules to plan replacement timing and budget for fleet turnover.

Equipment and Machinery Planning

Manufacturers depreciate machinery on a set schedule for both tax reporting and internal capital planning.

Technology Asset Lifecycle

IT departments apply an assumed depreciation rate to computers and equipment to plan refresh cycles and budget for replacements.

In each case, the schedule exists to answer the same forward-looking question: given what this is worth today and how fast it typically loses value, what should we expect it to be worth at some specific point in the future.

Frequently Asked Questions

Questions specific to declining-balance depreciation, including how it compares to straight-line methods and how it interacts with tax rules.

What's the difference between declining balance and straight-line depreciation?

Declining balance, used here, applies the same percentage rate to a shrinking value each year, so the dollar amount of depreciation is largest in the first year and smaller each year after. Straight-line depreciation instead subtracts an equal dollar amount every year, regardless of the asset's current value.

Does an asset ever depreciate to exactly zero using this formula?

No, a percentage-based decline approaches zero but never mathematically reaches it, since each year only removes a fraction of whatever value remains. In practice, accountants set a residual or salvage value and stop depreciating once it's reached.

How do I choose the right depreciation rate for an asset?

Many jurisdictions publish standard depreciation rates or schedules by asset category for tax purposes; for internal planning, a rate is often chosen to match how quickly an asset actually loses market value or usefulness.

Is depreciation the same as market value decline?

Not necessarily, depreciation is a scheduled accounting or tax method using an assumed rate, while actual market value can decline faster or slower than that schedule depending on real-world demand, condition, and usage.

How does depreciation affect taxes?

Depreciation is typically deductible as a business expense, reducing taxable income each year by the calculated depreciation amount. The specific rules and allowable rates vary significantly by jurisdiction and asset type.

Can depreciation be applied monthly instead of annually?

Yes, use a monthly rate and a number of months instead of years; the same declining-balance formula applies at any consistent time interval.

What happens once an asset is fully written off for tax purposes but still in use?

It continues to be used with no further depreciation deduction available, since its book value has reached its designated residual value, the asset itself doesn't stop functioning, only the tax deduction stops.

How is depreciation different from amortization?

Depreciation applies to physical (tangible) assets, vehicles, machinery, buildings. Amortization is the equivalent concept applied to intangible assets, like patents or licenses, and to loan principal paid down over time.

Why do some assets depreciate faster in their first year than in later years?

Because declining-balance depreciation calculates each year's amount from the previous year's already-reduced value, the largest base value exists in year one, so the largest dollar depreciation happens then too, even at a constant percentage rate.

Can a depreciation rate change partway through an asset's life?

In accounting practice, yes, a rate can be revised if an asset's expected useful life or usage pattern changes, though this calculator assumes one constant rate across the full period entered.