Generate a full year-by-year depreciation schedule using straight-line, double declining balance, or MACRS, so you know exactly what your equipment, vehicle, or rental property is worth on paper at any point.
This tool generates complete depreciation schedules for tangible business assets using the three most commonly used US methods: straight-line, double declining balance (200% DB), and MACRS. It applies to equipment, vehicles, machinery, computers, furniture, and residential rental property. The results show annual depreciation expense, accumulated depreciation, and book value at each year-end โ the core figures you need for financial statements, tax returns, and asset disposition analysis. For 2026 tax planning, the calculator also integrates bonus depreciation phase-out rules and Section 179 expensing limits so you can compare first-year deduction strategies side by side.
1. Enter the asset's original cost (purchase price plus capitalized costs).
2. Enter the estimated salvage value (residual value at end of useful life; enter 0 if none).
3. Enter the useful life in years (or select an asset class for MACRS auto-fill).
4. Select your depreciation method: straight-line, double declining balance, or MACRS.
5. For MACRS, select the property class (5-year, 7-year, 27.5-year, etc.).
6. Click "Calculate" to generate a full year-by-year depreciation schedule.
Straight-Line: Annual Depreciation = (Cost โ Salvage Value) รท Useful Life. The same dollar amount is deducted each year.
Double Declining Balance: Annual Depreciation = Book Value ร (2 รท Useful Life). Applied to the declining book value each year (not to original cost), ignoring salvage value until book value approaches it.
MACRS: The IRS prescribes rates by asset class and convention (half-year or mid-quarter). For 5-year property (autos, computers) the MACRS rates are: Year 1: 20%, Year 2: 32%, Year 3: 19.2%, Year 4: 11.52%, Year 5: 11.52%, Year 6: 5.76%.
Straight-line example on a $50,000 asset with $5,000 salvage value and 5-year life: ($50,000 โ $5,000) รท 5 = $9,000/year.
Book value on the schedule represents what remains on the balance sheet, not fair market value. Accumulated depreciation is the total deduction taken to date. When you sell or retire an asset, the difference between sale price and remaining book value triggers a taxable gain or loss โ including potential depreciation recapture taxed as ordinary income.
For US tax purposes, the Modified Accelerated Cost Recovery System (MACRS) is not optional โ it's the required depreciation method for most tangible property placed in service after 1986. MACRS assigns every asset to a property class with a set recovery period and accelerated rates.
Common MACRS property classes:
The MACRS half-year convention assumes all assets are placed in service at the midpoint of the tax year, which is why Year 1 deductions are typically half what Year 2 is. If more than 40% of depreciable assets are placed in service in the final quarter of the year, the mid-quarter convention applies instead โ a nuance that catches many first-time filers off guard.
Two mechanisms allow businesses to deduct a large portion of asset cost in Year 1 rather than spreading it over the MACRS schedule:
Bonus Depreciation: The Tax Cuts and Jobs Act allowed 100% first-year bonus depreciation through 2022. The phase-out schedule reduced it to 80% in 2023, 60% in 2024, and 40% in 2025. For tax year 2026, bonus depreciation stands at 20% under the current phase-out schedule before the provision expires entirely unless extended by Congress. This means on a $200,000 equipment purchase, a business can deduct $40,000 in bonus depreciation in 2026 and then use MACRS for the rest.
Section 179: Allows businesses to expense the full cost of qualifying property up to a dollar limit in the year of purchase, regardless of bonus depreciation rules. The 2026 Section 179 limit is $1,160,000, with a phase-out beginning at $2,890,000 in total qualifying property placed in service. Section 179 cannot create or increase a tax loss โ it's limited to taxable income. Bonus depreciation has no such income limitation and can create a net operating loss (NOL).
Choosing between bonus and Section 179 requires analyzing current-year taxable income, NOL carryforward position, and projected future income. The depreciation calculator lets you model both scenarios side by side.
Outside of MACRS (which is required for US taxes), both methods appear in financial accounting (GAAP), international reporting, and internal management accounting.
Straight-line: Preferred when an asset delivers uniform value across its life โ a building, a long-term license, or production equipment operating at constant capacity. It produces predictable, equal charges on the income statement and is simpler to administer.
Double declining balance (DDB): Preferred when an asset loses value faster in early years โ vehicles, computers, and technology equipment. DDB front-loads deductions, improving cash flow in early years. It typically switches to straight-line in the final years to avoid depreciating below salvage value. This is the logic MACRS adopts for 5-year and 7-year property classes.
For GAAP financial statements, companies can choose whichever method best matches the asset's consumption pattern. The important practical point: the method used for tax returns (MACRS) often differs from the method used for financial statements, creating a deferred tax asset or liability on the balance sheet.
Residential rental property gets a 27.5-year straight-line MACRS depreciation schedule. The land component is never depreciable โ only the building and improvements. A property purchased for $350,000 with the land appraised at $70,000 has a $280,000 depreciable basis: $280,000 รท 27.5 = $10,182 annual depreciation deduction.
This is one of the most valuable tax benefits in residential real estate investing. The deduction reduces paper taxable income even while the property may be appreciating in market value. However, when the property sells, accumulated depreciation is recaptured by the IRS at a 25% rate (Section 1250 unrecaptured gain) โ a tax cost that many first-time investors underestimate. Running a full depreciation schedule before acquisition helps model the eventual recapture liability.
Original cost plus capitalized improvements; excludes land for real property.
MACRS ignores salvage value; straight-line and DDB use it to floor book value.
IRS assigns MACRS lives by property class; GAAP allows estimates based on actual asset use.
Half-year convention is standard MACRS; mid-quarter convention applies when 40%+ of assets are placed in Q4.
20% for 2026 โ applies before MACRS rates on qualifying property.
$1,160,000 cap in 2026; cannot exceed taxable income.
Gains on asset sales can trigger ordinary income tax at up to 25% on prior depreciation deductions.
A sheet-metal fabricator places a $180,000 CNC machine into service in January 2026. MACRS 7-year property; half-year convention. Year 1 MACRS rate: 14.29% โ $25,722. The company also claims 20% bonus depreciation on the remaining basis: $180,000 ร 20% = $36,000 in bonus, then MACRS on the remaining $144,000 for Year 1: $144,000 ร 14.29% = $20,578. Total Year 1 deduction: $56,578. Without bonus, the deduction was $25,722 โ a $30,856 difference that meaningfully lowers 2026 taxable income.
Elena purchases a duplex for $385,000. A cost segregation analysis identifies $55,000 as land value. Depreciable basis: $330,000. Annual MACRS residential depreciation: $330,000 รท 27.5 = $12,000 per year. Over 10 years of ownership, she accumulates $120,000 in depreciation deductions. If she sells for $510,000, her taxable gain calculation must account for the $120,000 in depreciation recaptured at 25% ($30,000 in recapture tax) plus capital gains on the remaining appreciation.
1. Separate land from building on any real estate purchase using a professional appraisal or cost allocation study โ land is never depreciable and affects your annual deduction significantly.
2. Model Section 179 vs. bonus depreciation before filing: Section 179 is limited to taxable income, while bonus depreciation can generate an NOL that carries forward.
3. Track book value separately from tax basis if your financial statements use a different depreciation method than MACRS.
4. Flag the mid-quarter convention risk if you're placing multiple assets in service โ bunching acquisitions in Q4 can trigger less favorable depreciation timing.
5. Build depreciation recapture into your exit model on any real estate or equipment acquisition, especially before selling a property or disposing of a large asset.
6. Use cost segregation studies on commercial property to accelerate deductions by reclassifying components (wiring, flooring, fixtures) from 39-year to 5 or 7-year MACRS property.
A: Annual Depreciation = (Asset Cost โ Salvage Value) รท Useful Life. A $40,000 asset with $4,000 salvage value and 6-year life depreciates at $6,000 per year.
A: MACRS (Modified Accelerated Cost Recovery System) is the IRS-mandated depreciation method for US business assets placed in service after 1986. It assigns recovery periods and accelerated rates by property class, allowing faster deductions than straight-line in the early years.
A: Bonus depreciation allows businesses to immediately deduct a percentage of qualifying asset costs in the year of purchase. For 2026, the rate is 20% (phased down from 100% in 2022 under TCJA). It applies before MACRS on the remaining basis and can create a net operating loss.
A: Section 179 allows expensing of qualifying property up to $1,160,000 in 2026, but cannot create or increase a tax loss โ it's capped at taxable income. Bonus depreciation has no income cap and can generate a loss, but it applies to a set percentage rather than 100% full expensing.
A: Residential rental property uses a 27.5-year straight-line MACRS schedule. Only the building and improvements are depreciable โ land is excluded. Annual deduction = Depreciable Building Value รท 27.5.
A: When you sell a depreciated asset for more than its book value, the IRS recaptures prior depreciation deductions as taxable income. For real property, unrecaptured Section 1250 gain is taxed at up to 25%.
A: DDB applies twice the straight-line rate to the asset's declining book value each year. It front-loads deductions and is useful for assets that lose value rapidly in early years, like vehicles and technology equipment.
A: Yes. Business vehicles are generally 5-year MACRS property. Luxury auto limits apply โ the IRS sets annual caps on passenger vehicle depreciation (including bonus depreciation) that vary by vehicle type and year placed in service.
Brief disclaimer: This calculator provides estimates for educational and planning purposes only. Actual depreciation deductions, MACRS classifications, Section 179 limits, and bonus depreciation rules depend on IRS regulations, asset classification, and your specific tax situation. Consult a qualified tax professional before filing. Results should be treated as planning guidance rather than tax or legal advice.