How to Calculate Furniture Depletion

You can easily calculate the value of furniture that is not antique along with its change in value over time – typically known as the depreciation rate (or depletion, although that term is usually reserved for resources that are used up). First, consider that furniture usually has a life expectancy of five years. Assuming the furniture depreciates 20 percent per year, subtract that 20 percent from the purchase price for every year you have owned it. If you prefer, you could opt for a furniture depreciation calculator like the one from Splitwise, but for antique pieces, you should consult a qualified appraiser.

Furniture Depreciation Calculator

If you are looking to calculate the depletion, or depreciation, of office furniture for a tax write-off, there are several ways to calculate the depreciation rate more accurately. Furniture starts losing its value the moment it is delivered because regular use during a 40-hour workweek wears down chairs, desks and tables.

There are many furniture depreciation formulas. Three common ones are straight-line depreciation, double declining balance depreciation and sum-of-the-years' digits depreciation. These methods calculate the decrease in an asset's value and are a part of the generally accepted account principles (GAAP), as explained by the Financial Accounting Foundation.

Straight-Line Depreciation

Straight-line depreciation subtracts the salvage value of the furniture – an estimated value of the asset once it reaches its supposed end-of-life – from its original cost. The difference is the value the furniture loses every year during its use. It is also the total amount to be expensed.

The Corporate Finance Institute explains that the formula for straight-line depreciation is as follows:

Annual Depreciation Expense = (Cost of the Asset - Salvage Value) / Useful Life of the Asset

For example, say the asset's cost was $50,000, the salvage value is estimated to be $10,000, and the useful life is expected to be five years. The calculation is:

($50,000 - $10,000) = $40,000 / 5 years

Thus, the annual depreciation expense is $8,000.

Double Declining Balance Depreciation Method

Double declining balance depreciation is an accelerated depreciation method used to expense short-lived assets. Intended to depreciate assets twice as fast as the straight-line method, this approach does not depreciate uniformly. Instead, the furniture depreciates in larger amounts during the earlier years and smaller amounts during later years. It is best for assets that lose their value quickly.

If the asset purchased is worth $20,000, the double declining balance depreciation method deducts 20 percent of $20,000 one year, 20 percent of the remaining $16,000 the next, and so on.

Sum-of-the-Years' Digits Depreciation

Sum-of-the-years' digits depreciation accelerates more than straight-line depreciation but less than double declining balance depreciation. This method separates annual depreciation into fractions using the sum of the number of years of the furniture's useful life. For example, if the furniture is estimated to have a useful life of seven years, the sum-of-the-years' value is (7+6+5+4+3+2+1) = 28.

Each year is assigned a descending value. For the seven-year example, the first year's value is 7, the second's value is 6, and so on. To calculate sum-of-the-years' digits depreciation, use this formula:

Straight-Line Depreciation Value x The Year's Fraction =The Year's Depreciation

In the above example, assume it's the first year and the straight-line depreciation value is $8,000, making the calculation:

$8,000 x 7/28 = $2,000

Furniture Depreciation Rate

The website explains that to simplify matters, the IRS updates depreciation rates on certain types of office furniture using a fixed method approved by Congress. Currently, the IRS uses the Modified Accelerated Cost Recovery System (MACRS).

For furniture to be written off, it must be owned and not rented, used for business purposes, have a determined useful life (exceptions can apply to historical pieces), and have an expected useful life of at least one year.

Within the MACRS system, certain materials have different depreciation rates. For example, wooden furniture has a depreciation rate at 14 percent with an estimated seven-year useful life.