# Salvage Value

## What is a 'Salvage Value'

Salvage value is 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.

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## BREAKING DOWN '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.

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Discover the difference between two valuations, the book value and the salvage value, and the respective purpose of each ... Read Answer >>
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Learn how an asset's salvage value is subtracted from its initial cost to determine the amount by which an asset is depreciated ... Read Answer >>
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Learn what depreciation is and how to calculate it using the straight line method, declining balance method, and the sum-of-the ... Read Answer >>

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