How Do I Calculate Depreciation? What Calculation Methods Can I Use?
How Do I Calculate Depreciation? What Calculation Methods Can I Use? Depreciation is defined as the value of an asset over its useful life. How depreciation is calculated determines how much of a depreciation deduction you can take in any one year, so it is important to understand the methods of calculating depreciation.Answer: How Is Depreciation Calculated? The formula for calculating annual depreciation on an asset is: • The useful life of the asset • Less the salvage value of the asset at the end of its useful life • Divided by the cost of the asset. For example, the annual depreciation on a machine with a useful life of 20 years, a salvage value of $1000 and a cost of $50,000 is $2450 (($50,000-$1,000)/20). Are There Different Ways to Calculate Depreciation? There are several methods used to calculate depreciation. The method described above is called “straight-line” depreciation, in which the amount of of the deduction for depreciation is the same for each year of the life of the
