Salvage Value

(engineering) The cost that could be recovered from the sale of used equipment when removed or scrapped. The actual market value of a specific facility or equipment at a particular point in time.

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 Says:
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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Estimated value of a property when the taxpayer completes his use of the property. In determining the amount of depreciation allowable, salvage value must be subtracted from Basis. Salvage value is ignored by the MACRS and ACRS rules.

The estimated Value that an Asset will have at the end of its Useful Life.
Example: An appraiser estimates the useful life of a building at 40 years; she also estimates that the building's salvage value would be $10,000 in 40 years. Consequently, all but $10,000 of the building cost is to be Depreciated over 40 years.