Use this depreciation calculator to get instant results:
You bought equipment for KES 500,000. How much can you deduct from your taxable income? Get it wrong and you either overpay taxes or face KRA penalties for over-claiming.
Depreciation isn’t just accounting – it’s cash in your pocket. Every shilling you legitimately deduct reduces your tax bill. But depreciation rates in Kenya vary wildly: computers depreciate at 30% while telephones only get 12.5%.
This depreciation calculator shows you exactly what to claim based on official KRA rates, whether you’re buying vehicles, machinery, or buildings.
Depreciation Meaning: What Is Depreciation in Kenya? #
Depreciation meaning in business: it’s how you recover the cost of assets over time through tax deductions. KRA doesn’t allow standard accounting depreciation – instead, you claim “capital allowances” or “investment allowances” at fixed rates.
Key difference: You can’t just make up depreciation numbers. KRA sets specific depreciation rates for each asset class, and your depreciation calculator must use these official rates.
Understanding accumulated depreciation: This is the total depreciation claimed on an asset since purchase. Your depreciation calculator tracks both annual and accumulated depreciation to show remaining written-down value.
Depreciation Formula: How to Calculate Depreciation in Kenya #
Depreciation Formula 1: Straight-Line Method #
The straight-line depreciation formula is the most common and simple method.
Straight line depreciation formula: Annual Depreciation = (Asset Cost – Salvage Value) ÷ Useful Life
Example using straight line method of depreciation – Computer:
- Asset cost: KES 100,000
- Salvage value: KES 10,000
- Useful life: 3 years
- Depreciable amount: KES 100,000 – KES 10,000 = KES 90,000
- Annual depreciation: KES 90,000 ÷ 3 = KES 30,000
Year-by-year breakdown:
- Year 1: KES 30,000 depreciation | Accumulated: KES 30,000 | Book value: KES 70,000
- Year 2: KES 30,000 depreciation | Accumulated: KES 60,000 | Book value: KES 40,000
- Year 3: KES 30,000 depreciation | Accumulated: KES 90,000 | Book value: KES 10,000 (salvage)
Advantages: Simple, predictable, widely accepted for financial reporting. KRA accepts straight line for most assets like buildings, furniture, and office equipment.
The straight line depreciation method keeps annual depreciation constant throughout the asset’s life.
Depreciation Formula 2: Reducing Balance Method #
The reducing balance depreciation method applies depreciation rate to the remaining book value each year.
Reducing balance formula: Annual Depreciation = Book Value × Depreciation Rate
Example – Vehicle (25% rate):
- Asset cost: KES 2,000,000
- Salvage value: KES 200,000
- Useful life: 5 years
- Depreciation rate: 25%
Year-by-year calculation:
- Year 1: KES 2,000,000 × 25% = KES 500,000 | Book value: KES 1,500,000
- Year 2: KES 1,500,000 × 25% = KES 375,000 | Book value: KES 1,125,000
- Year 3: KES 1,125,000 × 25% = KES 281,250 | Book value: KES 843,750
- Year 4: KES 843,750 × 25% = KES 210,938 | Book value: KES 632,812
- Year 5: KES 632,812 × 25% = KES 158,203 | Book value: KES 474,609
Advantages: Higher depreciation in early years, matches actual asset value decline. KRA accepts reducing balance with specific rates: Computers 30%, Vehicles 25%, Machinery 12.5%.
This depreciation method front-loads deductions for faster tax recovery and matches how assets actually lose value.
Depreciation Formula 3: Sum of Years Digits #
Accelerated depreciation method that front-loads deductions even more than reducing balance.
Sum of years digits formula: Annual Depreciation = (Remaining Life ÷ Sum of Years) × Depreciable Amount
Example – Equipment (4-year life):
- Asset cost: KES 500,000
- Salvage value: KES 50,000
- Useful life: 4 years
- Depreciable amount: KES 450,000
- Sum of years: 4+3+2+1 = 10
Year-by-year calculation:
- Year 1: (4÷10) × KES 450,000 = KES 180,000 | Accumulated: KES 180,000
- Year 2: (3÷10) × KES 450,000 = KES 135,000 | Accumulated: KES 315,000
- Year 3: (2÷10) × KES 450,000 = KES 90,000 | Accumulated: KES 405,000
- Year 4: (1÷10) × KES 450,000 = KES 45,000 | Accumulated: KES 450,000
Advantages: Higher early deductions, matches technology obsolescence. Less common for KRA purposes but acceptable for management accounting.
Depreciation Formula 4: Units of Production #
Based on actual usage rather than time.
Units of production formula: Depreciation per Unit = (Asset Cost – Salvage Value) ÷ Total Expected Units
Then: Annual Depreciation = Depreciation per Unit × Units Produced That Year
Example – Manufacturing machine:
- Asset cost: KES 1,000,000
- Salvage value: KES 100,000
- Expected total production: 100,000 units
- Depreciable amount: KES 900,000
- Cost per unit: KES 900,000 ÷ 100,000 = KES 9 per unit
If you produce:
- Year 1: 30,000 units → Depreciation: 30,000 × KES 9 = KES 270,000
- Year 2: 25,000 units → Depreciation: 25,000 × KES 9 = KES 225,000
- Year 3: 20,000 units → Depreciation: 20,000 × KES 9 = KES 180,000
Advantages: Matches depreciation to actual usage and revenue. KRA accepts for manufacturing equipment with measurable output.
Depreciation Rates in Kenya 2025: Complete Guide #
Use the depreciation calculator above or calculate manually using these official depreciation rates in Kenya:
Complete Depreciation/Capital Allowance Rates Table #
| Asset Class | Rate | Method | Description |
|---|---|---|---|
| Machinery & Equipment | |||
| Class 1: Heavy Equipment | 37.5% p.a. | Straight-line | Earth moving, lorries 3+ tonnes, forklifts, tractors |
| Class 2: Computers & Office Tech | 30% p.a. | Straight-line | Computers, photocopiers, scanners, printers |
| Class 3: Light Vehicles & Aircraft | 25% p.a. | Straight-line | Motorbikes, lorries under 3 tonnes, aircraft |
| Class 4: Telecom Equipment | 12.5% p.a. | Straight-line | Telephones, switchboards, bicycles |
| Buildings & Structures | |||
| Manufacturing Buildings/Machinery | 100% | First year | Investment deduction on cost |
| Industrial Buildings | 10% p.a. | Straight-line | After investment deduction |
| Commercial Buildings (Developed Areas) | 25% | First year | Capital deduction |
| Hotel Buildings | 10% p.a. | Straight-line | Tourism sector buildings |
| Specialized Assets | |||
| Telecom Equipment | 20% p.a. | Straight-line | Telecommunications infrastructure |
| Computer Software | 20% p.a. | Straight-line | Purchase of right to use |
| Farm Works | 100% | First year | Structures enhancing farm operations |
| Agricultural Equipment | Varies | By class | Based on equipment type |
| Enhanced Investment Allowances | |||
| Manufacturing (Any location) | 100% | First year | Buildings and machinery |
| Investment >KES 200M (Outside major cities) | 150% | First year | Nairobi, Mombasa, Kisumu excluded |
| SEZ Enterprises | 100% | First year | Special Economic Zones |
| EPZ Manufacturing | 100% | First year | Export Processing Zones |
| Ships (125+ tons) | 100% | First year | New/refitted power-driven ships |
Note: Under the 2024 amendments, the new Second Schedule introduces accelerated claims at 50% in first year, with residual claimed at 10% or 25% on reducing balance.
Vehicle Depreciation for Import Duty #
For imported vehicles, KRA uses the EAC Depreciation Schedule to calculate customs value:
| Vehicle Age | Depreciation Rate |
|---|---|
| 0-6 months | 5% |
| 6-12 months | 10% |
| 1-2 years | 20% |
| 2-3 years | 30% |
| 3-4 years | 40% |
| 4-5 years | 50% |
| 5-6 years | 55% |
| 6-7 years | 60% |
| 7-8 years | 65% (maximum) |
Maximum depreciation capped at 65% from 70% previously, effective September 2023. Vehicles manufactured 8 years ago are the oldest allowed for import in 2025.
How to Calculate Depreciation in Kenya #
Method 1: Straight-Line Depreciation #
Most common for wear and tear allowances.
Formula: Annual Depreciation = Original Cost × Depreciation Rate
Example – Computer:
- Cost: KES 100,000
- Rate: 30% p.a.
- Year 1: KES 100,000 × 30% = KES 30,000 deduction
- Year 2: KES 100,000 × 30% = KES 30,000 deduction
- Year 3: KES 100,000 × 30% = KES 30,000 deduction
- Fully depreciated in 3.33 years
Method 2: Reducing Balance Depreciation #
Used for new investment allowances post-2024.
Formula: Annual Depreciation = Written Down Value × Rate
Example – Machinery (New System):
- Cost: KES 1,000,000
- Year 1: 50% = KES 500,000
- Written down value: KES 500,000
- Year 2: KES 500,000 × 25% = KES 125,000
- Written down value: KES 375,000
- Year 3: KES 375,000 × 25% = KES 93,750
- Continues until fully depreciated
Method 3: 100% Investment Deduction #
For qualifying manufacturing and certain investments.
Example – Manufacturing Equipment:
- Cost: KES 5,000,000
- Year 1: Claim full 100% = KES 5,000,000 tax deduction
- Immediate tax savings: KES 5,000,000 × 30% (corporate rate) = KES 1,500,000
For investments over KES 200M outside major cities: 150% deduction means KES 200M investment = KES 300M tax deduction.
Real Examples Using Depreciation Calculator #
Example 1: Office Computer (Straight-Line) #
You bought a computer for KES 150,000. Expected to last 5 years with KES 15,000 salvage value.
Using straight-line method:
- Asset cost: KES 150,000
- Salvage value: KES 15,000
- Useful life: 5 years
- Depreciable amount: KES 135,000
- Annual depreciation: KES 135,000 ÷ 5 = KES 27,000
- First year tax deduction: KES 27,000
- Book value after year 1: KES 123,000
Your depreciation calculator shows the computer depreciates equally each year, reaching salvage value in exactly 5 years.
Example 2: Delivery Vehicle (Reducing Balance) #
You bought a delivery van for KES 3,000,000. Using 25% reducing balance rate common for vehicles.
Using reducing balance method:
- Asset cost: KES 3,000,000
- Salvage value: KES 300,000
- Rate: 25%
- Year 1 depreciation: KES 3,000,000 × 25% = KES 750,000
- Book value after year 1: KES 2,250,000
- Accumulated depreciation: KES 750,000
Continuing schedule:
- Year 2: KES 2,250,000 × 25% = KES 562,500
- Year 3: KES 1,687,500 × 25% = KES 421,875
- Year 4: KES 1,265,625 × 25% = KES 316,406
The depreciation calculator shows you claim more in early years when vehicle loses value fastest.
Example 3: Manufacturing Equipment (Sum of Years) #
You invested KES 800,000 in production equipment with 4-year life, KES 80,000 salvage.
Using sum of years digits:
- Asset cost: KES 800,000
- Salvage value: KES 80,000
- Depreciable amount: KES 720,000
- Useful life: 4 years
- Sum of years: 10 (4+3+2+1)
Year-by-year:
- Year 1: (4÷10) × KES 720,000 = KES 288,000
- Year 2: (3÷10) × KES 720,000 = KES 216,000
- Year 3: (2÷10) × KES 720,000 = KES 144,000
- Year 4: (1÷10) × KES 720,000 = KES 72,000
First year gives 40% of total depreciation – massive early tax deduction.
Example 4: Production Machinery (Units Method) #
You bought a machine for KES 2,000,000 expected to produce 200,000 units, salvage KES 200,000.
Using units of production:
- Asset cost: KES 2,000,000
- Salvage value: KES 200,000
- Expected production: 200,000 units
- Cost per unit: (KES 2,000,000 – KES 200,000) ÷ 200,000 = KES 9 per unit
If you produce:
- Year 1: 50,000 units → KES 450,000 depreciation
- Year 2: 60,000 units → KES 540,000 depreciation
- Year 3: 40,000 units → KES 360,000 depreciation
Depreciation matches actual usage – perfect for manufacturing where production varies.
Common Depreciation Calculation Mistakes #
Mistake 1: Forgetting Salvage Value #
You depreciated the full asset cost instead of (Cost – Salvage Value). For a KES 500,000 asset with KES 50,000 salvage, you should depreciate KES 450,000, not KES 500,000.
Impact: Over-claiming depreciation leads to KRA penalties when they audit.
Mistake 2: Wrong Depreciation Method #
You used straight-line when reducing balance would give better early deductions. A KES 1,000,000 vehicle:
- Straight-line (5 years): KES 200,000 Year 1
- Reducing balance (25%): KES 250,000 Year 1
Lost benefit: KES 50,000 less deduction in year 1 when cash matters most.
Mistake 3: Not Tracking Accumulated Depreciation #
You forgot to subtract previous years’ depreciation when using reducing balance. Year 2 should use (Cost – Year 1 Depreciation), not original cost again.
Impact: Claiming depreciation twice or calculating wrong amounts.
Mistake 4: Salvage Value Exceeds Cost #
You entered salvage value of KES 600,000 for an asset costing KES 500,000. Your depreciation calculator will reject this – salvage must be less than cost.
Mistake 5: Using Wrong KRA Rates #
You applied 15% rate when KRA specifies 25% for your asset class. The depreciation calculator helps prevent this by showing standard rates for different assets.
Depreciation Methods: Comparing All Four Approaches #
Your depreciation calculator supports four different depreciation methods. Here’s when to use each:
1. Straight-Line Depreciation Method:
- Same amount each year
- Formula: (Cost – Salvage) ÷ Useful Life
- Easy to calculate and understand
- Best for: Buildings, furniture, office equipment
- Tax treatment: Widely accepted by KRA
2. Reducing Balance Method:
- Higher depreciation in early years
- Formula: Book Value × Rate
- Better reflects actual value decline
- Best for: Vehicles, computers, machinery
- KRA rates: Computers 30%, Vehicles 25%, Machinery 12.5%
3. Sum of Years Digits:
- Accelerated depreciation method
- Formula: (Remaining Life ÷ Sum of Years) × Depreciable Amount
- Even faster early deductions than reducing balance
- Best for: Technology, equipment with rapid obsolescence
- Tax treatment: Less common for KRA, mainly management accounting
4. Units of Production:
- Based on actual usage, not time
- Formula: (Cost – Salvage) ÷ Total Units × Units Produced
- Matches depreciation to revenue
- Best for: Manufacturing equipment, delivery vehicles
- Tax treatment: KRA accepts for measurable output
Comparison example – KES 1,000,000 asset, 5-year life, KES 100,000 salvage:
| Method | Year 1 | Year 2 | Year 3 | Total by Year 3 |
|---|---|---|---|---|
| Straight-Line | KES 180,000 | KES 180,000 | KES 180,000 | KES 540,000 |
| Reducing Balance (25%) | KES 250,000 | KES 187,500 | KES 140,625 | KES 578,125 |
| Sum of Years | KES 300,000 | KES 240,000 | KES 180,000 | KES 720,000 |
| Units (30% usage Y1-3) | KES 270,000 | KES 270,000 | KES 270,000 | KES 810,000 |
Your depreciation calculator shows results using the method you select, complete with year-by-year schedules.
Accumulated Depreciation: Tracking Total Deductions #
Accumulated depreciation is the sum of all depreciation claimed since asset purchase. Your depreciation calculator tracks this automatically.
Example – Vehicle over 4 years:
- Purchase price: KES 2,000,000
- Annual depreciation (25%): KES 500,000
| Year | Annual Depreciation | Accumulated Depreciation | Book Value |
|---|---|---|---|
| 1 | KES 500,000 | KES 500,000 | KES 1,500,000 |
| 2 | KES 500,000 | KES 1,000,000 | KES 1,000,000 |
| 3 | KES 500,000 | KES 1,500,000 | KES 500,000 |
| 4 | KES 500,000 | KES 2,000,000 | KES 0 |
Book value = Original cost – Accumulated depreciation
This calculation is crucial for:
- Annual tax returns
- Asset valuations
- Sale of assets (calculating profit/loss)
- Financial statements
Amortization vs Depreciation: Key Differences #
Many people confuse amortization vs depreciation. Here’s the difference:
Depreciation:
- Applies to tangible assets (physical items)
- Machinery, vehicles, buildings, equipment
- Can see, touch, and physically use
- Your depreciation calculator handles these
Amortization:
- Applies to intangible assets (no physical form)
- Patents, trademarks, goodwill, licenses
- Cannot physically touch
- Different calculation rules
Example:
- Buy computer for KES 100,000 → Use depreciation (30% rate)
- Buy software license for KES 100,000 → Use amortization (20% rate)
Both reduce taxable income, but apply to different asset types. The depreciation formula and amortization formula follow similar principles but use different rates and rules set by KRA.
When Depreciation Doesn’t Apply #
Your depreciation calculator won’t help with:
Land: Never depreciates – land doesn’t wear out
Goodwill: Cost and amortization not deductible – capital in nature
Personal Assets: Asset must be used for business purposes
Stock/Inventory: Goods for resale aren’t depreciable assets
Fully Depreciated Assets: Once written down to zero, no more deductions
How Your Depreciation Calculator Saves You Money #
Tax deduction = Cash saved
Example: KES 2,000,000 asset depreciation over 5 years
- Without proper depreciation:
- Profit: KES 5,000,000
- Tax (30%): KES 1,500,000
- With depreciation calculator (Year 1 – Reducing Balance 25%):
- Profit before depreciation: KES 5,000,000
- Depreciation deduction: KES 500,000
- Taxable profit: KES 4,500,000
- Tax at 30%: KES 1,350,000
You saved: KES 150,000 in Year 1 alone by claiming proper depreciation.
Your depreciation calculator shows these savings upfront across all years so you can plan investments strategically.
Key Inputs Your Depreciation Calculator Needs #
Asset Cost:
- Purchase price including installation
- Shipping and delivery costs
- Setup and commissioning fees
- Total: Everything to make asset operational
Salvage Value:
- Expected value at end of useful life
- What you’ll sell it for when done
- Usually 10-20% of cost for most assets
- Zero for fully consumed assets
Useful Life:
- How many years you’ll use the asset
- Based on your business usage, not manufacturer estimates
- Computers: 3-5 years
- Vehicles: 4-6 years
- Buildings: 25-50 years
- Machinery: 10-20 years
Depreciation Method:
- Straight-line for simple, consistent depreciation
- Reducing balance for assets losing value fast
- Sum of years for maximum early deductions
- Units of production for manufacturing equipment
Reducing Balance Rate (if applicable):
- KRA standard rates: Computers 30%, Vehicles 25%, Machinery 12.5%
- Your depreciation calculator uses these to match tax requirements
Special Depreciation Rules #
Farm Works – 100% Immediate #
Farmers get 100% deduction on structures enhancing farm operations:
- Irrigation systems
- Fences and gates
- Water storage
- Worker housing (1/3 of one farmhouse cost)
Telecommunications – 20% Straight Line #
Telecom companies claim 20% annually on equipment and software. Fully depreciated in 5 years.
Export Processing Zones #
100% investment deduction plus 10-year corporate tax holiday for EPZ manufacturers. Massive tax savings for exporters.
Special Economic Zones #
100% investment deduction on buildings and machinery for SEZ enterprises.
The Bottom Line: Using Your Depreciation Calculator #
Depreciation is free money from KRA – tax deductions that reduce your bill by 30% of the depreciated amount. But only if you calculate depreciation correctly.
Wrong depreciation rate? You lose deductions or face penalties. Wrong depreciation method? You might miss 50% first-year allowances. Wrong depreciation formula? Your accumulated depreciation won’t match KRA requirements.
Use the depreciation calculator at the top of this page to calculate depreciation accurately:
- Select your asset type from the dropdown
- Enter purchase cost
- Choose straight line depreciation or reducing balance method
- Get instant calculation of:
- Annual depreciation
- Accumulated depreciation
- Tax deductions
- Written-down value
- Plan investments around depreciation benefits
Understanding how to calculate depreciation means knowing your KES 2,000,000 equipment gives you KES 600,000 in tax savings over its life – and that knowledge helps you make smarter investment decisions.
Key takeaways:
- Use official depreciation rates in Kenya (not accounting estimates)
- Track accumulated depreciation for tax compliance
- Choose the right depreciation method for your assets
- Apply correct depreciation formula (straight-line vs reducing balance)
- Understand amortization vs depreciation for different asset types
Related Resources #
Internal Resources: #
- VAT Calculator Kenya – Add VAT to asset purchases correctly
- Profit Margin Calculator – Factor depreciation into profitability
- Withholding Tax Calculator – Calculate WHT on contractor/installation payments
Official Resources: #
- KRA Investment Incentives – Official capital allowance rates
- KRA Tax Deductions Guide – Investment allowance on capital expenditure (PDF)
- PwC Kenya Tax Deductions – Professional tax analysis and rates
- Kenya Investment Authority – Investment incentives and procedures
- KRA Vehicle Import Guidelines – Vehicle depreciation schedules
Sources & References: This depreciation calculator uses official rates from the Kenya Revenue Authority (KRA), Income Tax Act Second Schedule, and current 2024/2025 investment allowance regulations. All rates cited with links to original sources.
Last Updated: November 2025