Calculator inputs
Add expensing and bonus, choose a tax model, and optionally compare methods side-by-side.
| Input | Example |
|---|---|
| Purchase cost | $25,000 |
| Salvage value | $2,000 |
| Useful life | 5 years |
| Section 179 | $0 |
| Bonus | 0% |
| Income (yr1) | $80,000 |
| Flat tax rate | 25% |
- Enter cost, salvage value, and useful life.
- Choose a convention and optional upfront expensing.
- Select tax model and income assumptions.
- Pick methods to compare and set a display method.
- Calculate, review charts, then export reports.
Formula used
Depreciable basis = Purchase Cost − Salvage Value.
Section 179 is applied first, capped to basis.
Bonus depreciation = (Basis − Section 179) × Bonus %.
Remaining basis = Basis − Section 179 − Bonus.
Straight-line: Annual = Remaining Basis ÷ Life (year 1 prorated).
Declining balance: Depreciation = Book Value × (2 ÷ Life), capped at salvage and may switch to straight-line.
Sum-of-years digits: Depreciation = (Remaining Life ÷ Σ1..Life) × Remaining Basis (year 1 prorated).
Tax savings = Tax(Income) − Tax(Income − Depreciation).
NPV savings = Σ (Tax Savingsᵧ ÷ (1 + Discount Rate)ᵧ).
What these options change
Upfront expensing shifts deductions to year 1, often increasing early tax savings. Method choice changes the timing of the remaining basis deductions.
Income growth affects the tax base each year, while progressive brackets can make savings non-linear when depreciation moves income across bracket thresholds.
Always confirm eligibility and rules for your jurisdiction.
Depreciation timing and cash flow
Depreciation is a non-cash expense that reduces taxable income, which can improve after-tax cash flow. This calculator isolates timing by projecting yearly deductions, book value, and estimated tax savings. When deductions are accelerated, cash flow improves earlier, even when total depreciable basis is unchanged. This matters for budgeting, debt service coverage, and reinvestment planning during growth periods.
Comparing straight-line and accelerated methods
Straight-line spreads remaining basis evenly across the useful life, producing stable annual deductions. Accelerated methods such as declining balance and sum-of-years digits front-load deductions, then taper later. The chart highlights how early-year deductions shift the tax profile. Use the comparison summary to evaluate whether earlier savings outweigh lower future deductions under your expected income path.
Impact of Section 179 and bonus depreciation
Optional expensing shifts a portion of basis into year one. Section 179 is applied first, then bonus depreciation is applied to remaining basis at the selected percentage. This reduces the basis left for future years, which changes both the schedule shape and the present value of estimated tax savings. If you stack large first-year deductions, confirm you still have sufficient taxable income to benefit.
Flat rate versus progressive brackets
With a flat rate, tax savings are proportional to depreciation each year. With progressive brackets, savings can be nonlinear because depreciation may move taxable income into a lower bracket. The bracket section lets you model threshold effects, which is useful when income is near a bracket boundary. Combine this with income growth to stress-test deductions across realistic operating scenarios.
Using NPV to compare alternatives
Net present value discounts future tax savings to reflect time value of money. A higher discount rate places more weight on early savings and can make accelerated deductions look more attractive. If financing costs are high or liquidity is tight, NPV is often a clearer comparison than total savings alone. Review NPV alongside risk, compliance, and the administrative effort required to document claims for better capital allocation decisions.
FAQs
Does this calculator replace professional tax advice?
No. It estimates timing effects using your assumptions. Always confirm eligibility, limits, and reporting rules with a qualified tax professional for your jurisdiction and filing status.
Why do total depreciation amounts look similar across methods?
Methods usually change timing, not total depreciable basis. Over the full life, total depreciation approaches purchase cost minus salvage, subject to rounding and any expensing options you apply.
What does the convention setting change?
It adjusts first-year depreciation. Month proration uses months in service, while half-year assumes a half-year in service. This affects the first year and the remaining pattern.
How are Section 179 and bonus depreciation applied here?
Section 179 is deducted first in year one, capped to depreciable basis. Bonus depreciation is then applied as a percentage of the remaining basis before regular depreciation begins.
How is tax savings calculated under progressive brackets?
The tool computes tax on income before and after depreciation using your bracket thresholds and rates. Savings are the difference, which can vary if depreciation moves income across brackets.
What discount rate should I use for NPV?
Use a rate that reflects your financing cost or required return. Higher rates value earlier savings more. For internal planning, many teams use a weighted average cost of capital proxy.