Big Daddy is correct on buildings. Land is not depreciable.

I would argue that depreciation is an incentive to upgrade equipment. You have a choice as a business owner where depreciation and taxes are concerned.

Banker math 101. (time to put down the bong folks, this is a story problem)

Let's say I am about to make $80,000 in net income without depreciation after all other deductions, it is December 20. If I am an S-corp, that $80,000 flows to my personal tax return, and since I already paid myself $80,000, my income is $160,000 that year (say my wife's income is offset by all deductions including self employment tax, etc.). I can choose to pay a total tax of $33,544, (actually pretty close to this) or....

I can upgrade to equipment that is newer, gets more work per gallon of fuel, is more efficient, or whatever. Depending on what type of equipment it is, I can write off 100% of the purchase price of that equipment through section 179, or I can write it off over 5 years or more, depending on the accounting rules for that type of asset.

In the case of section 179 depreciation, let's say I buy a truck for $80,000. I sell my old one for $20,000 that was fully depreciated. I get to deduct $80,000 from my net income, but add back the $20,000 gain on sale, for a net reduction in income of $60,000 and a tax savings of approximately $15,856. The old truck could have lasted another 3 years, but maintenance costs would have been $15,000 over 3 years vs. zero on the new truck because of the warranty. I also get better fuel economy with the new truck, saving me another $5,000 per year. Gross savings over existing expenses for the next three years are $15,866+15,000+15,000 = $45,866 in three years. My net output was $60,000 (80-20=60) after buying the new truck and selling the old truck. This results in a net expense over 3 years of $14,134 for trading up to a newer stronger faster more efficient truck, or, I could have paid Uncle Sam $15,866 more in taxes today and had a worn out truck that might last me a few more years, and paid higher fuel costs and more in repairs. I'm buying a truck in the next few days.

This is an oversimplification, but there are business owners I bank who pencil this stuff out, exactly this way, to figure out when and if they upgrade equipment.

Sorry, I write story problems at work all day long.