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Depreciation calculator for book and tax.

What do the numbers come to once the work is shown?

Straight-line, declining balance, sum-of-years'-digits and units of production for the books, with a year-by-year schedule and the IRS MACRS half-year rates alongside.

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Asset and method (book / GAAP)
Method
Year 1 depreciation
$9,000
Straight-line
Depreciable base
$45,000
Cost − salvage
Total over the schedule
$45,000
Fully depreciated to salvage
Year-by-year schedule
YearOpening book valueDepreciationAccumulatedClosing book value
1$50,000.00$9,000.00$9,000.00$41,000.00
2$41,000.00$9,000.00$18,000.00$32,000.00
3$32,000.00$9,000.00$27,000.00$23,000.00
4$23,000.00$9,000.00$36,000.00$14,000.00
5$14,000.00$9,000.00$45,000.00$5,000.00
How this was worked out
Work shownrecomputed as you type
Annual depreciation = (cost − salvage) ÷ life = ($50,000 − $5,000) ÷ 5 = $9,000.00

GAAP requires depreciation that allocates cost less salvage over the useful life in a systematic and rational manner (ASC 360-10-35-4). The method, useful life and salvage value are estimates; a change is accounted for prospectively as a change in estimate (ASC 250-10-45-17).

Tax depreciation is different: MACRS

Federal tax uses MACRS, not the book life. The IRS table rates apply to the unadjusted basis (salvage is ignored), the recovery period is set by asset class, and the half-year convention gives half a year in year 1 and spills into one extra year. The difference between book and tax depreciation creates a deferred tax item under ASC 740. Bonus depreciation and Section 179 are not modeled; neither is the mid-quarter convention, which applies when more than 40% of the year's depreciable basis is placed in service in the last three months of the tax year.

Recovery period
Recovery yearTable A-1 rateTax depreciation on $50,000
120.00%$10,000.00
232.00%$16,000.00
319.20%$9,600.00
411.52%$5,760.00
511.52%$5,760.00
65.76%$2,880.00

Source: IRS Publication 946 (2025), Appendix A, Table A-1 (3-, 5-, 7-, 10-, 15- and 20-year property, half-year convention). 3- to 10-year property uses 200% declining balance and 15- and 20-year property 150% declining balance, each switching to straight-line. Check the current publication and the client's tax return before relying on these figures.

Recomputing depreciation as an audit procedure

GAAP requires depreciation that allocates the cost of an asset, less salvage value, over its estimated useful life in a systematic and rational manner (ASC 360-10-35-4). Auditors recompute the charge for significant additions and test the reasonableness of the total as an analytical procedure. Changes in the method, useful life or salvage are changes in estimate, applied prospectively (ASC 250-10-45-17).

Tax depreciation follows MACRS. The rates shown come from IRS Publication 946 (2025), Appendix A, Table A-1, which uses 200% declining balance for 3-, 5-, 7- and 10-year property and 150% for 15- and 20-year property, both switching to straight-line, with the half-year convention. Take the expense into the fixed asset rollforward checker to tie it to the ledger.

Common questions

What is the straight-line depreciation formula?

Annual depreciation = (cost − salvage value) ÷ useful life. A $50,000 asset with a $5,000 salvage value and a 5-year life is depreciated $9,000 a year.

How does double declining balance work?

Each year’s charge is the opening book value × 2 ÷ useful life. Salvage is ignored in the rate but book value never goes below it. Most schedules switch to straight-line over the remaining life once that gives a larger charge, so the asset reaches salvage on time.

Why is tax depreciation different from book depreciation?

Federal tax uses MACRS: recovery periods set by asset class, rates from IRS tables applied to the unadjusted basis with no salvage value, and a convention (usually half-year). GAAP uses the entity’s own estimate of useful life and salvage. The difference is a temporary difference for deferred taxes under ASC 740.

What are the MACRS 5-year percentages?

Under the half-year convention, IRS Publication 946 Table A-1 gives 20.00%, 32.00%, 19.20%, 11.52%, 11.52% and 5.76% over six tax years.

How do I handle an asset bought part-way through the year?

Enter the months in service in the first year. The calculator prorates each asset-year across fiscal years, which is the usual way to apply declining balance and sum-of-years-digits to a partial first year.

Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.

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