Buildings usually depreciate over a longer time period, such as 27.5 years, or something like that, based on IRS tax treatment. Check your depreciation schedule. Using straight line depreciation, a building with an acquisition cost of $275,000 would throw off $10,000/year in depreciation.

There is a difference between value appreciation and depreciation and IRS tax treatment of the useful life of an asset (depreciation), which is what you were describing.

How you figure equipment expense isan example of instituting replacement reserves as a way to budget for equipment expenses. That is great! Many business owners fail to budget or plan for this expense and spend it.

Depreciation may not be an incentive to upgrade equipment in a service business. It ceratinly is in an equipment intensive industry like trucking, logging, and construction.