Your Guide to Metalworking Automation Tax Incentives

Introduction

The "One Big Beautiful Bill Act" (OBBBA) has created an unprecedented opportunity for fabrication shops looking to upgrade their equipment. If you're considering investing in welding or plasma cutting cobots, understanding the new permanent 100% bonus depreciation can unlock serious tax savings – and help your shop grow faster than you ever thought possible.

For small to medium fabrication shops operating on tight margins, every dollar counts. When it comes to fabrication shop equipment financing in 2025, the OBBBA permanently reinstated 100% bonus depreciation for qualified property acquired after January 19, 2025, meaning you can deduct the full cost of qualifying equipment in the year you buy it, rather than spreading that deduction over several years. This isn't just about saving on taxes – it's about freeing up cash flow to address your biggest operational challenges.

What is Bonus Depreciation?

Think of bonus depreciation as the government's way of encouraging businesses to invest in new equipment. Instead of the old system where you'd write off equipment costs slowly over 5-7 years, the permanent 100% bonus depreciation lets you deduct 100% of the equipment cost immediately.

Here's the simple version: Buy a $100,000 welding cobot after January 19, 2025, and you can deduct the entire $100,000 from your taxable income that same year. It's like getting an instant discount equal to your tax rate.

The OBBBA made this benefit permanent at 100% for qualified property acquired after January 19, 2025. This means the window of opportunity is now wide open – and unlike previous versions that were set to phase down, this benefit is here to stay.

Source: The Tax Adviser - Bonus Depreciation Phase-out Planning and WOH - Key Depreciation Changes from the One Big Beautiful Bill Act

How Does Bonus Depreciation Work for Welding Cobots?

• It must be qualified property (manufacturing equipment like cobots definitely qualifies)
• It must be acquired after January 19, 2025
• You must place it in service during the tax year

Note: For equipment acquired before January 20, 2025, lower rates may apply (60% for property placed in service in 2024, 40% for property placed in service between January 1-19, 2025).

Source: WOH - Key Depreciation Changes from the One Big Beautiful Bill Act

• Equipment: Complete welding cobot system 
• Cost: $100,000 
• Your shop's tax rate: 25% (combining federal and state)*

• Year 1 deduction: ~$14,000
• Tax savings in Year 1: ~$3,500
• You're out-of-pocket: $96,500

• Year 1 deduction: $100,000 (the full amount)
• Tax savings in Year 1: $25,000
• You're out-of-pocket: $75,000
• That's an immediate $21,500 difference in your favor.

*Tax rates vary by business structure and location. Consult your tax advisor for your specific situation.

Why This Matters for Small to Medium Fabrication Shops

For shops balancing growth with tight budgets – and dealing with the triple challenge of labor shortages, delivery pressure, and cash flow constraints – bonus depreciation can dramatically reduce the real cost of automation. But the benefits go way beyond just tax savings.

• Labor Shortage Solution: Instead of competing for scarce skilled welders, cobots handle repetitive tasks while your existing team focuses on complex work
• Backlog Relief: 24/7 operation helps clear project backlogs without overtime costs
• Quality Consistency: Eliminate the variability between different welders and shifts
• Flexibility for High-Mix Work: Quick programming changes for different parts without retraining staff

• The cobot saves you $6,500/month in labor costs (conservative estimate based on replacing overtime hours and improving throughput - see our ROI analysis)*
• Your effective tax rate is 25%
• You finance the cobot at 7% interest*

Real Customer Example: Tank Technologies went from 3 minutes of manual plasma cutting per part to 11 seconds using our Cobot Cutter – that's a 16x improvement in speed!

• Monthly cobot payment: ~$1,500
• Monthly labor savings: $6,500
• Net monthly cash flow: +$5,000
• Time to break even: 15 months (after accounting for reduced monthly tax savings)

• Monthly cobot payment: ~$1,500
• Monthly labor savings: $6,500
• Immediate tax refund: $25,000
• Net cash flow: Positive from day one

*These figures are based on customer case studies and conservative estimates. Actual savings vary by shop size, current labor costs, and operational efficiency. Learn more about the hidden ROI drivers of cobots or contact us for a customized ROI analysis.

The cobot essentially pays for itself immediately when you factor in the tax benefits. Understanding cobot ROI with tax benefits helps explain why so many fabrication shops are making the switch from traditional labor models.

Risk mitigation: What if the equipment doesn't perform as expected? You've still claimed the depreciation, so your tax benefits are locked in. Plus, with Hirebotics' comprehensive training and support programs, performance issues are rare and quickly resolved. Read how we helped Advanta Industries overcome initial challenges and achieve success.

How Does Bonus Depreciation Compare to Other Financing Options?

The OBBBA also increased Section 179 expensing limits, giving you even more options for immediate equipment deductions.

*Section 179 has annual limits ($2.5M for 2025) and phases down after $4M in total equipment purchases.

Source: WOH - Key Depreciation Changes from the One Big Beautiful Bill Act

The bonus depreciation purchase option stands out because it combines immediate ownership with the lowest real cost and fastest path to positive cash flow.

• A skilled welder costs $60,000-$80,000 annually
  in wages and benefits (when you can find them)
• The cobot handles repetitive work, freeing skilled welders for complex projects and problem-solving
• With bonus depreciation, your first-year cobot cost might be lower than a single welder's annual salary
• Cobots provide the consistency and 24/7 availability that helps you clear backlogs and meet tight delivery schedules
• Real customer success stories show how shops maintain quality while increasing throughput

Industry-Specific Applications

Welding vs. Plasma Cutting Equipment: The good news is that bonus depreciation applies equally to both welding cobots and plasma cutting systems. The IRS sees them both as qualifying manufacturing equipment.

Multi-Capability Systems: Here's where it gets really interesting. When you purchase a welding cobot that can also do plasma cutting (like many of Hirebotics' integrated systems), the entire system qualifies for bonus depreciation as a single piece of equipment. You're not splitting the depreciation between functions – you get the full benefit on the complete system price.

Bundled Equipment Packages: If you buy a cobot along with safety equipment, programming software, and training as a complete package, the entire bundle typically qualifies. Just make sure your vendor structures the sale properly to maximize your benefits.

What Your CPA Needs to Know

When you sit down with your tax advisor, here's the key information they'll need:

Equipment Details:

• Exact purchase price and date placed in service
• Equipment classification (manufacturing equipment qualifies as Section 1245 property)
• Verification that it's qualified property under Section 168(k) - IRS Bonus Depreciation FAQ

Tax Planning Considerations:

• Your projected taxable income for the year
• Whether you have enough tax liability to use the full deduction
• State tax implications (varies by state)
• Any AMT (Alternative Minimum Tax) considerations

Documentation Requirements:

• Purchase agreements and invoices
• Installation and commissioning records showing "placed in service" date
• Equipment specifications demonstrating it's manufacturing equipment
• IRS Publication 946 provides complete documentation requirements

Pro tip: Share this article with your CPA before your meeting. It'll save time and ensure you're both speaking the same language about the opportunities.

Urgency & Practical Considerations

Year-End Tax Deadlines: To claim bonus depreciation for 2024, your equipment must be "placed in service" by December 31st. That doesn't just mean purchased – it means installed, tested, and ready for production use.

Equipment Lead Times: Here's the reality check: Quality cobot systems typically have 8-12 week lead times from order to installation. If you're reading this in November, you might already be cutting it close for 2024 benefits.

Manufacturing Hub Incentives: Many states offer additional incentives for manufacturing equipment purchases. While Hirebotics is based in Tennessee, our customers span the country and often qualify for local incentives on top of federal bonus depreciation. Check with your state's economic development office or local chamber of commerce – you might discover additional tax credits or grants that make your investment even more attractive.

Frequently Asked Questions

How much can I save on welding equipment taxes? Your savings equal the equipment cost multiplied by your tax rate. On a $100K system with a 25% tax rate, you'd save $25,000 in taxes.*

*Actual tax savings depend on your specific tax situation and available tax liability.

Can small fabrication shops use bonus depreciation for cobots? Absolutely. There's no business size restriction for bonus depreciation. Whether you have 5 employees or 50, you qualify.

What are the tax deadlines for bonus depreciation in 2025? Equipment must be placed in service by December 31, 2025, to claim the deduction on your 2025 tax return. [Verify current deadlines with IRS Publication 946 or consult your tax advisor]

Conclusion & Next Steps

Bonus depreciation isn't just a tax benefit – it's a competitive advantage. While your competitors are struggling with labor shortages and rising wages, you can invest in automation that pays for itself from day one.

The window for maximum benefits is permanent for equipment acquired after January 19, 2025, and equipment lead times are minimal with Hirebotics – most systems ship within one day. The shops that act decisively will gain a lasting advantage in efficiency, quality, and profitability.

Ready to explore how bonus depreciation can finance your next cobot? Contact our team to learn more and get a quote tailored to your shop. We'll help you structure the purchase to maximize your tax benefits and can share detailed ROI calculations and customer success stories specific to your applications.

Learn more about building stability in an unpredictable market with automation investments that pay for themselves.

Remember: Always consult with your tax advisor about your specific situation. This article provides general information, but every business is unique.

Hirebotics specializes in welding and plasma cutting cobots designed specifically for small to medium fabrication shops. Our team understands both the technical and financial aspects of automation investments.