How do you calculate annual Straight line depreciation?
James Olson
Updated on February 23, 2026
If you visualize straight-line depreciation, it would look like this:
- Straight-line depreciation.
- To calculate the straight-line depreciation rate for your asset, simply subtract the salvage value from the asset cost to get total depreciation, then divide that by useful life to get annual depreciation:
How to calculate straight line depreciation for a machine?
The straight line depreciation for the machine would be calculated as follows: 1 Cost of the asset: $100,000 2 Cost of the asset – Estimated salvage value: $100,000 – $20,000 = $80,000 total depreciable cost 3 Useful life of the asset: 5 years 4 Divide step (2) by step (3): $80,000 / 5 years = $16,000 annual depreciation amount
How to calculate the depreciation rate of an asset?
The useful life of the asset—how many years you think it will last. To calculate the straight-line depreciation rate for your asset, simply subtract the salvage value from the asset cost to get total depreciation, then divide that by useful life to get annual depreciation: annual depreciation = (purchase price – salvage value) / useful life
Where do I find useful life for depreciation?
A note on useful life: if you’re calculating the amount of depreciation for tax purposes, the useful life figure should come from the IRS, which has sorted most depreciable assets into one of seven “property classes .” (Property that depreciates over three, five, seven, 10, 15, 20 and 25 years, respectively.)
How does salvage value relate to depreciation expense?
Salvage Value Salvage value is the estimated amount that an asset is worth at the end of its useful life. Salvage value is also known as scrap value or residual value, and is used in calculating depreciation expense. The value depends on how long the company expects to use the asset and how hard the asset is used. For example, if a .
