A couple months ago, I interviewed one of the biggest business owners out in Los Angeles.
Excuse me, sir.
Quick question for you, man.
Is this your Ferrari?
Yeah.
And what do you do for living out in Los Angeles to be able to afford a Ferrari?
I own my own consulting firm.
So you're a business owner?
Yeah.
And how long have you been an entrepreneur for?
Six years.
And, over these six years, what's been the most amount of money that you've ever made in a single year.
Just over about $7.1 million last year.
$7 million?
Yeah.
You're sitting in a Ferrari right now.
This is a lot of people's dream car.
Tell me the story of how you bought this thing.
I'll be honest with you.
I had already offsetted all my taxes for the year, and I just wanted a Christmas gift.
So I just went and bought myself a Ferrari cash.
When you don't pay taxes, a lot of these types of purchases start to become a little bit different.
So you don't pay taxes?
Oh, no, I don't pay any taxes.
That video got over 60 million views across social media.
And like he said, he made over $7 million in a single year and didn't pay any money in taxes.
That's Carlton Dennis.
And he invited us out to his house out in Los Angeles to give you guys the game on what it takes to make a lot of money but, more importantly, keep a lot of money and not have to pay thousands of dollars and millions of dollars in taxes at the end of every year.
So let's go link up with Carlton and go see what he has to say for you guys.
He's got the G-Wagon out front. a Lamborghini truck.
We got to go get this game from him.
Come on, you guys.
Carlton, what's going on?
How are you doing?
Good to see you.
Great to see you.
Thank you for having us out here.
Welcome to Orange County, man.
Seriously, man.
The last time I saw you, man, our video did 60 million views together.
60 million?
60 million.
Are you serious?
48 million on Instagram, another 50 million on TikTok, and However million on Facebook.
Changing lives.
Yes, sir.
Let's go.
Super happy to be out here, man.
I'm glad to have you out here.
We talked about it in the preview.
Yeah.
People saw the interview.
Yes.
You made how much money this last year?
All right.
I made 7.1 last year in 2023.
2024, we just crossed 11 and a half million.
And how much money did you pay in taxes for those that don't know?
Last year, I paid $0 in federal taxes, $26,000 in state taxes.
And this year in 2024, I'm on pace to pay less than $92,000 in total taxes.
Now, how the hell is this possible, man?
Because that's insane.
You're touching eight figures high, seven figures in a single year, and you're not paid anything in taxes.
That's ridiculous.
Yeah.
How am I doing this?
Okay.
So first of all, is that legal?
Everything I'm doing is legal.
Everything I'm doing is if the IRS wanted to come after you, I welcome them.
IRS, you know who Carlton Dennis is.
I have one of the largest YouTube channels for tax strategy.
The IRS knows who I am.
I'm not afraid of the IRS.
I'm not afraid to use the tax code against the IRS.
And everything that I do is by the book, which is why I have so much fun with the tax code.
I focus on income shifting strategies.
How do I take money off of my tax returns?
I focus on depreciation.
How do I create a paper loss by investing in real estate?
And most importantly, I'm philanthropic.
I have a private family foundation that gives money back to other charities outside of my own.
That allows for me to also reduce my tax bill.
These are the three things that I do every single year that keep me at 0% on the federal side.
And I do pay a little bit of that Cali tax, but I'm okay with it.
Yeah.
So I got to say this though, because I want to put this in perspective for everyone watching right now.
Yeah, some of your clients are some of the biggest business owners in the world and i've interviewed guys.
A lot of the people i've interviewed are his clients, so you know this stuff better than anybody else and my goal for this video is to be a master class for anybody watching to understand the ins and outs to the loopholes to being able to avoid these taxes.
Yes right because, as you know it, the biggest expense for most business owners is what their taxes.
Man, it's always the taxes, not your mortgage, not your car payment, it's not your payroll, It's your taxes.
Have you seen people go broke with big tax bills?
I have seen people go broke with a big tax bill because they spend more money than what they have left over to pay Uncle Sam.
And by the time that they get the check from Uncle Sam, they don't have enough money in their bank account to pay it.
Wow.
So let's get right into it.
What are some of the industries that you've invested in personally that's been able to allow you to alleviate that bill and not have to pay anything to offset that?
It depends on the type of income that you're earning.
If you're a full-time W-2 or 1099 taxpayer, highly recommend that you look at short-term rentals, because the IRS will allow for you to manage the short-term rental for 100 hours and it becomes an active business.
If your tenants are staying in the property seven days or less, you can perform a strategy called the cost segregation study, which forces a paper loss on the tax returns.
And that paper loss is what can offset somebody's W-2 or somebody's 1099 income.
If you're somebody that maybe has a spouse that's not working maybe it's like a husband that's working in the wife's home taking care of the kids this is a perfect situation where you can make your wife a real estate professional.
She manages over the real estate portfolio and you can then make the real estate portfolio an active real estate business.
If you perform the cost segregation study strategy, it creates a large tax deduction on the paper and then that paper tax deduction can offset your W-2 or your 1099 income.
Now I can speak for a lot of entrepreneurs.
This year, our company will do, this is our first year that we're doing seven figures.
Congratulations.
Thank you, my friend.
22, not too bad for 22.
Not at all.
But I wanted to ask though, right?
Because most people that get into business they don't realize the insane amount that you are going to have to pay in taxes if you're not smart about having a strategy to kind of avoid that.
So let's talk to the people that are just starting out.
Maybe let's say that they're making their first six figures, they're making $100,000 this year.
And maybe they didn't run super lean.
Where they had some expenses, they didn't have great margins and they can't afford to, in their business, pay insane amounts in taxes.
We see this a lot, especially for people that are just starting to kind of make a lot more money.
Six figures, seven figures.
What are some of those initial steps that people should take to again avoid having to pay these crazy burdens?
Maybe if they don't have the means to be able to start investing in real estate, are there any other things that people can do to be able to avoid having to pay crazy tax bills, to save a lot more of that money?
Yeah, the first thing that you want to do as a self-employed individual that's starting to come into some money, is look at your entity structuring.
Most self-employed individuals start out as sole proprietorships or single member LLCs, and that's great until you cross about 50000 to 60000.
Once you're across that point, you need to look at switching to an S corporation to avoid paying self-employment taxes.
It's this nasty 15.3% on all of your business's profits.
If you just switch to an S corporation you can give yourself a salary now and now.
You only pay that 153 on whatever you took out of your business.
You completely avoid 153 on the rest of your business's profits.
That's step number one, entity structuring.
Step number two is let's figure out did you take advantage of all the things that you spent your money on?
Because sometimes business owners spend money on things that they didn't know were write-offs.
And so we can allocate expenses that we're taking on the personal card over to business.
If you forgot or didn't know that something was supposed to be a business write-off,
This can include cell phones, laptops travel that should have been business travel.
That you thought was personal.
We can allocate those expenses over to your business to drop down that total liability.
What's the biggest difference you notice in people's approach to taxes, from middle class versus wealthy people?
Speed, speed, speed, speed, speed, speed.
When you're wealthy, you're asking me, Carlton, where do I move the money to?
When do we set up the foundation?
Where do I send the wire?
It happens in hours, not days, not weeks.
When I'm dealing with middle class, they're nervous.
They're analysis paralysis.
They want to do more research than the tax professional did.
And it comes down to the fact that they're scared to spend money in order to save money.
Wealthy people understand I have to spend money in order to continue to play this game that Uncle Sam wants me to play.
And so they're willing to invest money into different vehicles quickly to avoid taxes, whereas the person that's in the middle class is more attached to the money and will take their time to determine if they're going to make an investment to offset their taxes, which could end up leading to them being in a situation where they just end up paying.
How much money have you saved your clients in taxes?
If you had to estimate, give me a number, how much money have you saved your clients in taxes?
Well over $100 million.
Do you have a specific scenario or example of a client that you've worked with, where they were coming to you stressing about how to pay crazy taxes?
You don't have to say the person, but could you give me a scenario?
We had a scenario of a woman who came into the office.
This was previous to the pandemic where we used to meet with people face to face.
And she had an IRS audit where she had taken a vehicle on her tax returns.
She had already visited seven other CPA firms.
They said that they didn't want to work with her.
When she came in, I looked at her tax returns and I saw the notice.
They were disallowing a vehicle on her tax returns in the amount of $1 million.
I asked her what the vehicle was.
She told me it was a yacht.
I said, why would we purchase a yacht for business?
She said, I am a real estate agent.
I speak on TV million dollar listings and I like to show my athletes and entertainers what it would look like to purchase a house from the views of the ocean.
I log all of the time that I go on and off of the boat.
I have a captain that knows every single person that's come on and off the boat and I've documented everything.
By taking her captain's log booklet, some of the photos that she had, as well as the expenses from her PL.
We went into the audit and leveraging code section 162A, which states that a business owner can take a business deduction.
If the business deduction is ordinary, necessary and reasonable to the business owner in the pursuit of income, we should be able to take the right off.
We won that audit in less than an hour.
And that was her ability to be able to ride off a yacht.
So when I have clients coming to me stressed out, sometimes it's stress around a $1 million yacht.
Sometimes it's stress around a $50,000 tax bill.
But it's up to me to figure out how to mitigate it.
Now, when I interviewed you out in Los Angeles the last time, you were in a Ferrari.
Yes.
And I know you also got the G-Wagon.
You've got the Lamborghini Urus.
Are they here today?
Yeah, those are outside.
Can we go take a look at them real quick?
Let's go for that.
Let's go take a look.
We might be picking up a new whip today.
Actually, what are you gonna be picking up?
So my ferrari is in the shop right now and they called me and they're like hey, we have another ferrari or we have this lamborghini sv.
Which one would you like more?
I was like, i don't know, i kind of have a lamborghini, but i'll come down and test drive the sv.
Yeah, and i went down and test drove the uh, lamborghini sv and uh, i think we might be picking the lamborghini up.
Yeah now, what's crazy is?
Most people look at cars like this as the depreciating assets.
How do you feel about that perspective that people give you whenever they say that about cars?
Cars are depreciating assets.
I 100 agree with them, but i also took 100 bonus depreciation on this car, which saved me I don't know about 92000 in taxes.
That $92,000 got reinvested into a multifamily property in Texas.
That's paying me cash flow of about $1,400 a month.
So if you're somebody that knows how to do math, you can buy a vehicle like this.
Offset your taxes, reinvest the tax savings into a cash flow producing asset and not worry about the fact that this car is still losing value sitting here in the driveway because it losing value offset in my taxes.
Right.
So the G-Wagon right here, why is it eligible for that deduction?
Is it because of the size and the weight of it?
Yeah.
So with this G-Wagon, the gross vehicle weight ratio is over 6,000 pounds.
And if you have a vehicle where the gross vehicle weight ratio is over 6000 pounds, plus the vehicle is being used more than 50 for business, the IRS will allow for you to take the vehicle's purchase price and write it off on your tax returns under code section 179 plus code section 168K.
So I utilized this strategy in 2022 on this vehicle, right before bonus depreciation went to 80 in 2023.
We're here in 2024.
Bonus depreciation is at 60%.
Donald Trump just got elected president.
He's expected to get inaugurated here in the next couple of weeks.
There's a possibility that bonus depreciation could go back to 100%.
And as a tax professional, I'm waiting to hear about that.
Wow.
Now a couple months ago, I actually interviewed a lady out in Beverly Hills and she was coming out of a G-Wagon.
I asked her what she did or how much money she made, and she, let's just say at least 10 times what a G-Wagon is.
And the reason why I'm asking this is and I want to talk about business here for a second what does it take?
This is a lot of people's dream car yeah, and you've got a lot of them.
But let's just take the g wagon, for example 100 200, 000 sometimes more than even that for this car.
A lot of people dream to be able to afford a car like this.
Yeah, how can somebody get a g wagon in today's world?
You can buy one of these cars if you understand leverage.
As a business owner.
I wasn't going to buy a car like this if i didn't get some type of benefit tax wise money coming back into my pocket.
Here's an example.
Let's just say that you're a business owner that's making 200000 a year.
You could put down a 20000 down payment on a car like this and be able to write off the entire purchase price, which was about 200K.
If you have 200K of income and you have a 200000 write off on your tax returns, you're essentially tax free.
Someone that's paying that has $200,000 of reportable income may pay $50,000 in taxes.
So they're pocketing 50K and then put $20,000 down.
They have a delta of about 30K.
Now they can reinvest that 30K into cashflow, producing assets, or back into their business that can help them make more money.
For somebody that's gonna buy a car like this, I would highly recommend that you do so with leverage.
You brought up leverage.
There's a big debate in business, good debt versus bad debt.
What's your thoughts on debt as a business owner?
Yes, there's good debt and there's bad debt.
There's bad debt, which is consumer debt, credit card debt, high interest rate debt.
That's the type of debt you want to avoid.
And then there's good debt, which is debt in the form of loans like buying a house.
The reason why that is considered good debt is because you're parking your money into an asset that could appreciate over time and you have the ability to borrow against the property.
The reason why I love real estate is because I can take out cash out refinances or HELOCs, which means that, even though I put my money into a property and I took out leverage, I may be able to pull out more than what I put into the property because of leverage.
And that's why I love real estate.
Many wealthy entrepreneurs have built their wealth by reinvesting into real estate over and over and over again.
And God forbid something happens to them, their heirs pick up those properties.
But sometimes they pick up those properties with no debt on the deal.
And so, when you think about it, the person that was living leveraged debt to build up this entire real estate portfolio and then passes it off to their heirs, sometimes without any debt on the deal.
So some of the wealthiest families got wealthy because of debt.
And I'm always going to leverage that to build my nest egg.
Yeah.
I have a client out in Miami owns several hundred million dollars worth of real estate.
And he actually said that you can tell how wealthy someone is based on the amount of access to debt that they have, how much debt they're able to kind of pull out, which is fascinating.
It's really interesting.
Yeah.
The more debt I take on, the more I'm actually able to increase my buying power, because if I'm able to keep more of my hard earned money in my pocket and not overextend myself while I'm leveraging debt,
I can continue to increase my buying power because I'll be able to continue to take on more and more debt but go into bigger and bigger investments because of it.
What's the best way to kind of get access to that capital that credit lines in today's world that you've seen has been efficient for yourself or other people as well?
Best way to get access to credit is to use credit and to start establishing the right type of relationships with bankers.
I know that for me it was getting into the banks and actually having a relationship with a banker and then, after having a certain amount of deposits, then you earn a private banker.
Once you have a private banking relationship, you can pull a lot of strings.
You get access to private equity deals.
You don't have to go into the bank if you don't want to to pull out money.
If you need transfers, you don't have to pay for the transfers.
You don't have to pay for the wires And, most importantly, they understand your business because they're a partner with you.
So if you need access to debt, they understand what you're using the debt for, because they have a pretty good understanding of what your business model is.
Let's say someone's making $100,000 a year right now.
Do you have any specific strategies they can implement, like kind of a walkthrough, a blueprint on what they can do to be able to avoid paying crazy money in taxes?
You want me to do a walkthrough right now?
Could we?
Let's break it down on the whiteboard.
Let's go.
Let's do it right now.
All right.
So we said 100K, right?
Yes.
And this could be 100K, W-2, 1099.
Entrepreneur.
Entrepreneur.
Okay.
It's 100K.
Now let's just say that I want to use a rental property to offset my taxes.
I'm going to have to come up with a down payment, but here's what I could do.
Let's just say that this property is $500,000 and I had a separate $100,000 that I saved up.
So I'm going to take out a $400,000 loan.
I could buy this 100000 property, just need one property, and what i'm going to do is i'm going to list this property as a short-term rental.
Here's the reason why if i list this property as a short-term rental and if this property has tenants that stay in the property seven days or less and i manage the property for a hundred hours, i can perform a strategy on this property called the cost segregation study.
Now this property right here is worth 500k, but with a cost segregation study i can accelerate depreciation.
On average when performing a cost segregation study you can get 20 of the building's purchase price as a year one tax write-off.
So with 500 000 property, 20 of that would equal a hundred thousand dollars.
If i had a hundred thousand dollars w-2 income and i had a hundred thousand dollar loss on my tax returns from depreciation.
I'm tax-free.
And this is how somebody can take a 500000 property, convert it to a short-term rental, manage it, create a paper loss and offset 100 of their W-2 or 299 income.
And this is just with an example of someone making 100K.
Imagine if there's somebody that's making a million and we took this property to a million dollars or to 2 million.
This game becomes so fun.
And that's why I need debt, right?
Because, in order to buy this property, I may not have 500K saved up, but I may have 100K saved up and I'm going to take out leverage OPM to get that other 400K.
Other people's money all day.
I've said it before, I'll say it again.
You know they don't teach that in school, right?
Absolutely not, bro.
This game of building wealth and buying real estate is not taught in schools.
I got to ask you for one more.
What is a tax hack?
Somebody watching this right now can take with them into their business their personal income that they can apply.
Give them one more tax hack right now that is not taught that most people do not know.
Most people don't know what the Augusta rule is.
And it's funny how the Augusta rule came to be.
It was a golf tournament called the Masters Golf Tournament that was.
It's held every single year in Augusta, Georgia.
The issue with Augusta, Georgia is there's not enough hotels out there.
So homeowners had to open up their primary residences to travelers who are coming in to watch this golf tournament.
People have been watching Tiger Woods play at the Masters Tournament for years.
The city of Augusta Georgia, enacted a code that said if you rent out your property for 14 days or less, You don't have to pay taxes on the rental income in the state of Georgia.
It's funny because a year and a half later, it became a federal tax code, IRC 280A.
Now anybody, whether you're a business owner or not, can rent out your primary residence for 14 days, charge rent and not pay taxes on the first 14 days of rental income.
This has been a strategy we've utilized with business owners, because if you have an S corp, the S corp is considered a separate person from who you are.
So you, as a business owner who owns the S corp, can rent your primary residence to your S corporation for 14 days.
Charge rent and deduct it on your tax returns.
And it's like a tax-free distribution coming right back to you, the individual.
Definitely a strategy that most taxpayers are not implementing, but is so easy and is low-hanging fruit.
And I absolutely recommend you get it implemented.
That's straight game right there.
For everybody that's watching, where can everybody find you at right now?
Yeah, you guys can find our company at taxalchemy.com.
Visit our YouTube channel at Carlton Dennis and go on Instagram and send us a message.
If you have any tax questions, we'd be more than happy to provide a free assessment.
Amazing.
Guys, the links to connect with Carlton check them out are down in the description below.
Go check out his business.
Go connect with carlton.
Thank you so much for having us.
Thank you, this was exceptional.
The game was crazy.
My friend, let's go.
Thank you.
