To find the remaining depreciable cost of an asset, subtract accumulated depreciation from the depreciable base: (Cost Basis − Salvage Value) − Accumulated Depreciation. For federal tax purposes under MACRS, salvage value is treated as zero, so the formula collapses to Cost Basis − Accumulated Depreciation.1Internal Revenue Service. Publication 946 – How To Depreciate Property The result is the total depreciation expense you have left to recognize over the asset’s remaining life.
Start With the Depreciable Base
The depreciable base is what you actually spread across the asset’s useful life. It starts with cost basis: the purchase price plus everything you paid to get the asset in service, including shipping, installation, testing, and any modifications required to make it operational.
From that total, subtract the salvage value you expect at retirement. The difference is the depreciable base. Buy equipment for $400,000 and expect to sell it for $40,000 when done, and the base is $360,000.
For federal tax, salvage value drops out. Under the Modified Accelerated Cost Recovery System, which applies to most tangible business property placed in service after 1986, salvage value is set to zero by statute.2Office of the Law Revision Counsel. 26 U.S. Code 168 – Accelerated Cost Recovery System Publication 946 confirms salvage value is “not used under MACRS.”1Internal Revenue Service. Publication 946 – How To Depreciate Property Your entire cost basis becomes the depreciable base for the tax calculation.
Carve Land Out of Real Property
If your asset is real property, split the purchase price between the building and the land before you calculate anything. Land is never depreciable. Treasury Regulation 1.167(a)-5 requires you to allocate basis proportionally based on the relative values of building and land at the time of purchase.3U.S. Government Publishing Office. Treasury Regulation 1.167(a)-5 Buy a commercial property for $1 million where the land is worth $250,000, and only $750,000 enters the depreciable base. Under-allocating to land is a common audit trigger, so document the valuation method.
Add Up Accumulated Depreciation
Accumulated depreciation is the running total of every depreciation expense you’ve claimed against the asset since it was placed in service. On the balance sheet it appears as a contra-asset, offsetting the original cost. The accuracy of this number drives the whole calculation.
How fast it grows depends on the method. Straight-line spreads expense evenly, so the accumulated total climbs in equal annual steps. Accelerated methods, including MACRS, front-load the expense. MACRS uses statutory percentage tables that apply a fixed rate to the asset’s unadjusted basis each year, so accumulated depreciation piles up quickly early and slows later.4Internal Revenue Service. Instructions for Form 4562 The recovery period assigned to the asset class — five years for computers and light trucks, seven for office furniture, 27.5 for residential rental, 39 for nonresidential buildings — sets the pace.1Internal Revenue Service. Publication 946 – How To Depreciate Property
Once you’ve chosen a method for tax purposes, you can’t switch it without IRS consent. Section 446 requires approval to change an accounting method,5Office of the Law Revision Counsel. 26 U.S. Code 446 – General Rule for Methods of Accounting which in practice means filing Form 3115.6Internal Revenue Service. Instructions for Form 3115
Run the Numbers
Say you bought a $400,000 machine under MACRS with no salvage value. After four years of accelerated depreciation, your Form 4562 records show $250,000 of accumulated depreciation. Your remaining depreciable cost is:
$400,000 − $250,000 = $150,000
That $150,000 is the total depreciation still to come across the asset’s remaining recovery period. If the same asset carried $360,000 of accumulated depreciation, the remaining depreciable cost would be $40,000. When accumulated depreciation reaches the depreciable base, the remaining depreciable cost is zero and the asset is fully depreciated. You cannot keep claiming deductions past that point.
Remaining Depreciable Cost Is Not Net Book Value
Under MACRS, remaining depreciable cost and net book value (also called adjusted basis) are the same number, because salvage value is zero. Under GAAP, where companies often carry a real salvage value on the books, they diverge. Net book value equals cost minus accumulated depreciation. Remaining depreciable cost equals net book value minus salvage value.
Take the same $400,000 machine with $250,000 of accumulated depreciation, but assign it a $40,000 book salvage value. Net book value is $150,000. Remaining depreciable cost is $110,000. The $40,000 difference is the salvage value you never depreciate. Expect your tax figure and your book figure to disagree on assets where GAAP salvage is nonzero.
When Section 179 and Bonus Depreciation Zero Out the Base
Two first-year provisions can drop the remaining depreciable cost to zero the moment you place an asset in service.
Section 179 lets you expense the full cost of qualifying equipment in the year it’s placed in service, up to a cap. For 2026, the maximum Section 179 deduction is $2,560,000, phasing out dollar-for-dollar once qualifying property placed in service exceeds $4,090,000. For SUVs over 6,000 pounds, the Section 179 deduction cannot exceed $32,000.7Internal Revenue Service. Rev. Proc. 2025-32 A Section 179 election reduces depreciable basis before any other depreciation is computed.1Internal Revenue Service. Publication 946 – How To Depreciate Property Expense $300,000 of a $300,000 machine under Section 179 and the remaining depreciable cost is zero immediately.
Bonus depreciation applies after Section 179 to whatever basis is left. The One Big Beautiful Bill Act permanently restored 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025.8Internal Revenue Service. Treasury, IRS Issue Guidance on the Additional First Year Depreciation Deduction Amended as Part of the One Big Beautiful Bill Buy $2,750,000 of equipment, take $2,560,000 under Section 179, and the remaining $190,000 can be wiped out by 100% bonus depreciation. For many assets purchased in 2026 and beyond, the remaining depreciable cost after year one is nothing.
Passenger Vehicles: Where the Calculation Actually Matters
Cars and light trucks are the main exception to full expensing. Section 280F caps annual depreciation on passenger automobiles regardless of what you paid.9Office of the Law Revision Counsel. 26 U.S. Code 280F – Limitation on Depreciation for Luxury Automobiles For vehicles placed in service in 2026, the caps with bonus depreciation are $20,300 in year 1, $19,800 in year 2, $11,900 in year 3, and $7,160 for each year after. Without bonus depreciation, year 1 is $12,300 and the later years match.10Internal Revenue Service. Rev. Proc. 2026-15
Buy a $60,000 car in 2026 and claim the $20,300 first-year cap with bonus depreciation. Your remaining depreciable cost after year one is $39,700, and you’ll only whittle it down by $7,160 a year once you pass year three. Vehicles stretch depreciation well beyond the nominal 5-year recovery period, which is why tracking the remaining depreciable cost on cars gets the most day-to-day use.
When Your Useful-Life Estimate Changes
If you later decide an asset will last longer or shorter than you first assumed, you don’t rework the prior years. Take the remaining depreciable cost as it stands and spread it across the revised remaining life going forward.
Equipment with a $60,000 remaining depreciable cost and two years left, revised to six years remaining, drops from $30,000 of annual straight-line expense to $10,000. Prior years stay as filed. Note that this treatment applies to a change in useful-life estimate, not a change in depreciation method itself; switching methods for tax requires Form 3115 and IRS consent.6Internal Revenue Service. Instructions for Form 3115
Why the Number Matters at Sale
The remaining depreciable cost tells you your adjusted basis, and adjusted basis drives your tax bill when you sell. Under Section 1245, gain on the sale of depreciable personal property is treated as ordinary income up to the total depreciation you’ve previously claimed.11Office of the Law Revision Counsel. 26 U.S. Code 1245 – Gain From Dispositions of Certain Depreciable Property Section 179 and bonus depreciation count as depreciation for recapture, so assets you fully expensed have the maximum recapture exposure.
Buy equipment for $200,000, claim $150,000 in total depreciation, and your adjusted basis is $50,000. Sell for $180,000, and the $130,000 gain is entirely ordinary income under Section 1245, because it falls under the $150,000 recapture ceiling.
Real property follows Section 1250, with a maximum recapture rate of 25% on the portion of gain attributable to prior depreciation.12Office of the Law Revision Counsel. 26 U.S. Code 1250 – Gain From Dispositions of Certain Depreciable Realty Knowing the remaining depreciable cost before you sell lets you size the recapture in advance and decide whether the timing works.