How To Calculate Annual Depreciation Tax Shield. Annual depreciation = $420,000 / 6 years = $70,000 = $21,000. The intuition here is that the company has an $800,000 reduction in taxable income since the interest expense is deductible.

Operating profit is calculated as: Depreciation tax shield = $20,000; Depreciation tax shield = depreciation * applicable tax rate.

How To Calculate Annual Depreciation Charge. A yearly wdv rate is calculated and annual depreciation amount is calculated from the opening wdv of each year. Multiply the number of hours (or units of production) in the asset's useful life by the cost per hour for total depreciation.

To calculate the annual amount of depreciation on a property, you divide the cost basis by the property's useful life. Multiply the number of hours (or units of production) in the asset's useful life by the cost per hour for total depreciation. Divide 18,000 by the 100,000 hours of estimated life that the car has, leaving you with 0.18.