Salvage Value

AAA

DEFINITION of 'Salvage Value'

The estimated value that an asset will realize upon its sale at the end of its useful life. The value is used in accounting to determine depreciation amounts and in the tax system to determine deductions. The value can be a best guess of the end value or can be determined by a regulatory body such as the IRS.

INVESTOPEDIA EXPLAINS 'Salvage Value'

The salvage value is used in conjunction with the purchase price and accounting method to determine the amount by which an asset depreciates each period. For example, with a straight-line basis, an asset that cost $5,000 and has a salvage value of $1,000 and a useful life of five years would be depreciated at $800 ($5,000-$1,000/5 years) each year.

Within the tax system, when a person donates a car he or she receives a tax deduction. The value of this deduction depends on the salvage value of the car. This salvage value is determined to be the current fair market value that could be obtained had the car been sold on that day rather than donated.

RELATED TERMS
  1. Amortization

    1. The paying off of debt in regular installments over a period ...
  2. Unit of Production Method

    A depreciation procedure used for property that is not in continuous ...
  3. Residual Value

    How much a fixed asset is worth at the end of its lease, or at ...
  4. Accounting

    The systematic and comprehensive recording of financial transactions ...
  5. Generally Accepted Accounting Principles ...

    The common set of accounting principles, standards and procedures ...
  6. Internal Revenue Service - IRS

    A United States government agency that is responsible for the ...
Related Articles
  1. An Introduction To Depreciation
    Active Trading

    An Introduction To Depreciation

  2. Depreciation: Straight-Line Vs. Double-Declining ...
    Forex Education

    Depreciation: Straight-Line Vs. Double-Declining ...

  3. New Wheels: Lease Or Buy?
    Home & Auto

    New Wheels: Lease Or Buy?

  4. Which is a better measure for capital ...
    Budgeting

    Which is a better measure for capital ...

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center