Enter the machine cost, salvage value, useful life and usage to see each year’s depreciation by the method chosen, book value, depreciation cost per hour and the comparison with MACRS tax depreciation.
Pre-sizing and estimating tool: results do not replace design, calculations or reports signed by a licensed professional, nor verification against the applicable codes and standards.
What the asset is still worth on the books at the end of each year, by the chosen method (thick line), the other methods and the tax rule.
Bars: each year’s charge by the chosen method and by the tax rule. Line: depreciation cost per productive hour.
Charge, accumulated depreciation and book value at year end; cost per productive hour and, alongside, the tax charge and tax basis.
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It is the loss of value of equipment through use, age and obsolescence, charged as a cost over its useful life. A $200,000 machine worth $20,000 after 10 years generates $180,000 of depreciation cost over that period. That cost goes into the machine hour rate, product pricing and, under tax rules, the income tax return.
With straight-line depreciation the example machine is charged $18,000 a year for 10 years. On 2 eight-hour shifts, 250 days and 85% availability, it runs 3,400 productive hours a year, so depreciation adds $5.29 per machine hour. At the end of year 5 its book value is $110,000.
Straight-line is the most common for costing and quotes and is easy to explain. Sum-of-the-years’ digits and double declining balance front-load the cost and track the fast early drop in used-equipment prices. Units of production is best when the machine runs unevenly, for example seasonal work. GAAP (ASC 360) asks for the method that reflects how the asset’s benefits are consumed.
Under IRS Publication 946, most manufacturing machinery is 7-year property under the General Depreciation System: 200% declining balance with a half-year convention, switching to straight-line, and no salvage value. The rates are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, 8.92%, 8.93% and 4.46% over 8 tax years. In the example, year 1 deducts $28,571.
They let a business deduct much more in the first year. For qualified property acquired after January 19, 2025, 100% bonus depreciation applies, and Section 179 expensing has a $2.5 million limit with a phase-out. This calculator shows regular MACRS only; elections, limits and state conformity should be checked with a tax adviser.
Books aim to match cost to the years the machine is used, over its real economic life. Tax rules aim at a simple, uniform deduction schedule, often faster. The total deducted is the same; the timing differs, and the gap is recorded as a deferred tax item. For pricing, use the economic life, not the MACRS class.
It works in whole years for book depreciation (no mid-year start), uses one useful life and one salvage value, and does not cover impairment, revaluation, mid-quarter convention, ADS or listed-property limits. Defaults are illustrative; confirm classes and elections with your accountant.
Important notice: Indus Metrics tools produce estimates and pre-sizing results from the data you enter and from published engineering methods. They do not replace design, calculations or reports signed by a licensed professional engineer (PE), nor verification against the applicable codes, standards and regulations, such as OSHA rules and the ASME codes. Material and fuel properties vary: check manufacturer data or your own process analyses before deciding. By using this site you agree to the Terms of Use.
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