Okay, what I am talking about is when somebody tells you (often an accountant) to go out in December and spend money so you reduce your tax burden.
Profits = Income - Expenses.
Taxes = Profits * tax rate.
So the logic is reduce your profits by spending your profits on expendable items.
Example
You show a 75,000 profit you are going to pay $22,500 in taxes.
So buy a 2005 F350 for work for $49,000 and can deduct the cost.
$75,000-$49,000 = $26,000 x tax rate = now you are only going to owe $7800 instead of $22,500.
That makes perfect sense if you need a F350 for work and you were going to buy one anyways, but to spend $49,000 to save $14,700 in taxes for something you don't need is basically spending a dollar to save 30 cents.
If you don’t need the truck I would rather pay the $22,500 in taxes and have and have the $52,500 to spend any way I see fit. I would get a lot more enjoyment out going on a trip around the world or paying my mortgage off by $52,500, than a new F350.
If you are going to need a new computer, or some new tools or something for the business, by all means now is the time to go and buy it.
If you have profits and you don't need anything, then pay the taxes and go spend the net income on stuff you want in your personal life - dinner, a boat, your house, savings, whatever.
Teetor - we are both basically saying the same thing, you are saying to reinvest profits into a cabinet shop, that is identical to reinvesting profits into a computer or tools, both will make you money. That is smart use of your money.
The majority of people in small businesses who are incorporated have declared themselves s-corps, so they are flow-through entities as far as the IRS is concerned. All profits flow through to the shareholders, whether they are disbursed or not. That is why when Grumpy says - I have money left in my bank account - it doesn't really mean anything, profits aren't based on cash on hand, they are based on (income - expenses), what you have in the bank doesn't mean you can spend it or it is taxable.
Really the only thing Grumpy can do just like everybody else, is reinvest in his company, invest in his retirement, or pay the taxes on the profits and disburse the net profits to himself and do with it personally as he sees fit.
Remember paying taxes is a good thing; it means you are making money!