How do I calculate the book value of equipment?

Book value of equipment equals its original cost minus accumulated depreciation, giving you the amount currently carried on the balance sheet.

The formula is straightforward: Book Value = Original Cost - Accumulated Depreciation. To get accumulated depreciation, most businesses use straight-line depreciation: subtract the equipment's estimated salvage value from its original cost, then divide by its useful life in years. Multiply that annual figure by the number of years the equipment has been in service to get accumulated depreciation, then subtract from the original cost.

For example: equipment purchased for $74,500 with a $7,650 salvage value and a 10-year useful life depreciates at $6,685 per year. After one year, accumulated depreciation is $6,685, leaving a book value of $67,815.

Book value is an accounting figure, not a market value

This is the distinction that trips up most equipment owners, lenders, and attorneys. Book value follows a depreciation schedule set at purchase; it has nothing to do with what the equipment would actually sell for today. A five-year-old CNC machine might be fully depreciated to near zero on the books while still commanding real money in the used equipment market, or the reverse can be true if the asset has become obsolete or damaged faster than its depreciation schedule assumed.

For estate tax filings, insurance claims, SBA lending, litigation, or any purpose requiring a defensible number, you need fair market value, not book value. That's determined through market analysis, comparable sales, and condition assessment, not a depreciation formula. If you're relying on equipment value for a legal, financial, or tax purpose, New York Equipment Appraisers can provide a USPAP-compliant valuation that reflects actual market conditions rather than an accounting entry. See our related FAQ on how we determine the value of used equipment for more on that process.