Computer depreciation: rules, rates and how to calculate it

Last updated: 2026-10-15

Computer depreciation is the accounting process that spreads the cost of a laptop or desktop over its useful life instead of expensing it on the day of purchase. In most European frameworks that life is 3 years (a 33.33% straight-line rate), while tax rules can be faster: one year in Germany, 100% first-year allowances in the UK and US. The alternative is computer leasing, where rent is expensed and nothing is capitalised.

What is computer depreciation?

Depreciation records the loss of value of a fixed asset through wear, time and technological obsolescence. A computer bought for the business is a tangible fixed asset: it is recorded on the balance sheet at its cost, then a share of that cost is charged to the income statement every year. That annual charge reduces taxable profit, either directly (France, Spain, Germany) or through a separate tax relief (UK capital allowances, US MACRS).

Three conditions usually apply before a computer is capitalised rather than expensed immediately:

• It is used by the business for more than one year. Consumables and accessories with a shorter life are expensed.

• Its cost exceeds the local capitalisation threshold. Below it, the purchase is booked as an expense (see the country table below).

• The business controls it. A purchased laptop is an asset; a laptop under an operating lease or a subscription generally is not, depending on the accounting framework.

The depreciable base is the purchase price excluding recoverable VAT, plus directly attributable costs such as delivery and initial configuration. Depreciation starts when the device is put into service, not on the invoice date.

Depreciation is not the same as the device's market value. A three-year-old laptop can be fully depreciated in the books (net book value of zero) and still be worth something on the second-hand market. That gap matters when the device is sold, given away or recycled.

What is the useful life and depreciation rate of a computer?

The most common useful life for computers is 3 years, which gives a straight-line depreciation rate of 33.33% per year. Some companies use 4 or 5 years for desktops, servers or rugged devices. Tax rules then set the minimum life or maximum rate allowed, and they differ sharply between countries, from a one-year write-off in Germany to a 25% maximum annual rate in Spain.

The rate follows from the useful life: rate = 100% / useful life in years. A 3-year life gives 33.33%, 4 years gives 25%, 5 years gives 20%. The useful life should reflect how long the business actually keeps its devices. A company that renews laptops every 36 months and depreciates them over 5 years will carry assets on its books that it no longer uses.

Depreciation rules for computers by country

Sources: GOV.UK Annual Investment Allowance, IRS Publication 946, BOFiP BOI-BIC-CHG-20-30-10, BMF letter of 22 February 2022. Thresholds and allowances change with each finance act: check them with your accountant before closing the books.

What about software?

Software follows the same logic only when it is purchased outright. A perpetual licence is an intangible asset, usually amortised over 1 to 3 years (France even allows an exceptional 12-month write-off). SaaS subscriptions such as Microsoft 365 or Google Workspace are operating expenses: nothing is capitalised and nothing is depreciated.

How do you calculate computer depreciation?

Straight-line depreciation divides the depreciable base by the useful life: the same amount is charged every year. The formula is depreciable base × straight-line rate × (months in service / 12). If a computer enters service mid-year, the first and last annual charges are prorated, so a 3-year asset is spread over four financial years.

Straight-line computer depreciation

Straight-line is the default method in almost every framework and the one auditors expect unless there is a reason to use another. Its main advantage is predictability: the charge is identical from one year to the next, which keeps budgets and IT cost per employee stable.

Formula: annual depreciation = depreciable base × (100% / useful life).

• Depreciable base: purchase price excluding recoverable VAT, plus directly attributable costs.

• Start date: the date the device is put into service.

• First year: prorated to the number of months (or days) in service.

• Residual value: usually zero for computers, since resale value after 3 years is uncertain.

Declining balance computer depreciation

Declining balance front-loads the charge: a fixed rate is applied to the remaining net book value each year, so depreciation is higher in the first years. In France, new computers qualify for a 41.67% rate (33.33% × 1.25). Germany's investment programme reintroduced a declining-balance option of up to 30% for movable assets acquired between July 2025 and the end of 2027, although the one-year rule is usually more favourable for IT.

The method makes sense for a profitable company that wants to reduce taxable profit early. It is less useful for a loss-making start-up, which gains nothing from a larger deduction today. Once the straight-line charge on the remaining value exceeds the declining-balance charge, the schedule switches to straight-line for the remaining years.

Worked example: a fleet of 50 laptops over 3 years

Take 50 laptops put into service on 1 January, with an illustrative depreciable base of 75,000 in local currency (1,500 per laptop excluding VAT). The amounts matter less than the percentages, which apply to any budget.

Three points stand out. First, the declining-balance schedule switches to straight-line in year 2, because 43,750 over the 2 remaining years (21,875) exceeds 43,750 × 41.67% (18,229). Second, Germany, the UK and the US (with Section 179 or bonus depreciation instead of MACRS) allow the full 75,000 to be deducted for tax in year one, while the statutory accounts may still show 25,000 per year. Third, if the laptops had entered service on 1 July, the straight-line schedule would run 12,500, 25,000, 25,000 and 12,500 across four financial years.

On a 3-year cycle, the company also has to plan the cash outlay of 75,000 at the start of each cycle, plus repairs and out-of-warranty replacements that are expensed as they occur. This is where the buy-versus-lease question becomes a finance question rather than an IT one.

What should you do with a fully depreciated computer?

A fully depreciated computer has a net book value of zero but often still works. The business can keep using it, sell it, give it to an employee, or send it for recycling or refurbishment. Each option has an accounting consequence: a sale above zero creates a taxable gain, and a disposal must be recorded to remove the asset from the fixed-asset register.

• Keep it: no entry is needed while it stays in service, but older devices may no longer receive security updates. Windows 10 reached end of support in October 2025, so machines that cannot run Windows 11 become a security liability.

• Sell it: the sale price minus net book value is a capital gain, taxed at the normal corporate rate.

• Give it to an employee: in several countries this creates a taxable benefit in kind for the employee, with exemptions that vary (France, for example, exempts the free transfer of fully depreciated IT equipment within an annual limit).

• Recycle or refurbish it: the asset is written off. In the EU, the WEEE directive requires disposal through an approved channel, and data must be erased securely first.

Can you avoid computer depreciation by leasing?

Yes, in most cases. With an operating lease or a device subscription, the business does not own the computers, so there is no fixed asset to record and no depreciation schedule to maintain. The monthly rent is booked as an operating expense and is deductible as it is incurred, which moves IT spending from CAPEX to OPEX.

The accounting framework decides how far this goes. Under local GAAP in France, Germany and Spain, lease payments are simply expensed. Under IFRS 16, leases are recognised on the balance sheet, but laptops and personal computers typically qualify for the low-value asset exemption, so they can stay off balance sheet. The revised UK FRS 102, effective for periods beginning on or after 1 January 2026, follows a similar model with the same exemption. US GAAP (ASC 842) has no low-value exemption, although many companies apply a capitalisation threshold that keeps small leases off the balance sheet.

Leasing changes the cost structure, so the contract deserves the same scrutiny as a purchase. Before signing, check four points:

1. Total cost over the term: monthly rent multiplied by the number of months, plus any set-up, delivery or end-of-term fees.

2. What is included: warranty, repairs, replacement devices, configuration and support, or only the hardware.

3. End-of-term options: return, renewal or buy-out, and who handles data wiping and logistics.

4. Early exit and changes in headcount: what happens if an employee leaves or the team shrinks before the end of the contract.

The transition from CAPEX to OPEX covers the strategic side of this choice, and our guide to understanding IT leasing contracts details the clauses to negotiate.

Practical checklist: buy and depreciate, or lease?

Simplify computer depreciation with Fleet

Buying laptops means capitalising each device, tracking a 3-year depreciation schedule, recording every disposal and funding a large cash outlay at each refresh cycle. Each of those steps is manageable, but across a growing team in several countries they add finance work, tax risk and cash pressure.

Fleet replaces device purchases with a subscription and runs the whole lifecycle in one platform, across 150+ countries:

• Fixed monthly subscription: no upfront investment, and IT costs move to OPEX instead of a depreciation schedule.

• Warranty and repairs included: 100% warranty coverage, repairs and a loaner device for the whole contract.

• Planned renewal: devices are renewed every 3 years, and Fleet handles their second life, including donations.

• Real-time visibility: every device and its status tracked in the Cockpit dashboard, without maintaining a fixed-asset register.

Fleet already serves over 100,000 users from 1,500 companies. Book a demo and see how Fleet helps you equip your teams without tying up cash in depreciating assets.

FAQ

What is the depreciation rate for a computer?

The usual straight-line rate is 33.33% per year, based on a 3-year useful life. Some companies use 25% (4 years) or 20% (5 years). Tax rules can differ: Spain caps the rate at 25%, while Germany allows a one-year write-off.

Is a laptop 3-year or 5-year property?

For US tax purposes, computers are 5-year property under MACRS, unless the business uses Section 179 or bonus depreciation to deduct the full cost in year one. In the books, most companies still depreciate laptops over 3 years.

Can I deduct a computer as a business expense in full?

Often, yes. The UK Annual Investment Allowance, US Section 179 and bonus depreciation, and Germany's one-year useful life all allow a full deduction in the year of purchase. In France, only items under €500 excluding VAT can be expensed immediately.

Does a leased computer need to be depreciated?

No, in most cases. A leased computer is not owned by the business, so the rent is expensed. Under IFRS 16 and FRS 102, laptops usually qualify for the low-value exemption; under US GAAP, the treatment depends on the lease and the company's capitalisation policy.

When does depreciation of a computer start?

Depreciation starts on the date the computer is put into service, not the purchase date. If that date falls during the financial year, the first year's charge is prorated to the time in service.

Conclusion

Computer depreciation follows a simple principle, a 3-year life and a 33.33% straight-line rate in most books, but tax rules diverge sharply by country, from Germany's one-year write-off to Spain's 25% cap. For a company with a growing fleet, the real decision is whether to own and depreciate devices or lease them and expense the rent, and that choice is best made with your accountant on the basis of cash, tax and the accounting framework you report under.