Depreciation spreads the cost of a business asset — minus what it will still be worth at the end of its useful life — across the years it's used. Which method you pick changes when the expense is recognized, not how much total depreciation there is: straight-line, declining balance, and sum-of-years-digits all depreciate the exact same total dollar amount (cost minus salvage) over the asset's life; they just disagree on the year-by-year pace.

Book value vs. depreciation expense

Depreciation expense is the amount recorded as a cost in a given year. Book value is the running total left over — cost minus all accumulated depreciation so far. Book value starts at the full cost and declines every year until it reaches salvage value, where it stops. An asset is never depreciated below its estimated salvage value.

When to use each method

Straight-line is the default choice for financial reporting because it's simple, predictable, and matches expense evenly to years of use — good for assets that lose value at a steady pace, like office furniture or buildings.

Declining balance and sum-of-years-digits are accelerated methods: they record more expense early and less later, which better matches assets that lose most of their value in the first few years — vehicles, computers, and other tech that ages quickly — and can better match rising maintenance costs in later years against lower depreciation.

Straight-line vs. accelerated methods

Declining balance depreciates as a percentage of the shrinking book value, so it front-loads the most aggressively, but it can leave a large undepreciated remainder if the chosen rate is too low relative to the useful life. Sum-of-years-digits front-loads more gently and, like straight-line, always fully depreciates down to salvage by the end of the useful life — no capping is ever required. Use the Method Compare tab to see how differently the same asset depreciates under all three.

Tax depreciation (MACRS) vs. book depreciation

This calculator computes book depreciation — the figures used in financial statements. For U.S. federal income tax, most businesses instead use MACRS (Modified Accelerated Cost Recovery System), which assigns assets to fixed recovery classes (3, 5, 7, 15, 27.5, or 39 years) with IRS-prescribed percentage tables and half-year or mid-quarter conventions — different from the straight-line, declining-balance, and SYD methods here. It's common and permitted for a company's tax depreciation schedule to differ from its book depreciation schedule; consult a tax professional or IRS Publication 946 for MACRS-specific calculations.