Karlton Dennis Earned $7 Million While Paying 0 in Taxes
Intro:
Karlton Dennis is one of the most successful business owners and tax strategy experts in Los Angeles. Known for his consulting firm and sharp business acumen, Karlton has made a name for himself for his ability to generate wealth and his legal strategies that help minimize his tax liabilities.
In 2023, Karlton earned over $7 million, but here’s the kicker—he paid $0 in federal taxes. That’s right, despite generating millions, Karlton legally reduced his tax bill to nothing, a feat many would think is impossible. His strategy isn’t about hiding money—it’s about using the tax code to his advantage, something he has mastered over the years.
Mastering the Tax Code
Karlton’s success isn’t solely about making money; it’s about keeping it. His secret? He uses tax strategies that most business owners overlook. His approach includes:
Income Shifting: Moving income around to reduce taxable amounts.
Depreciation: Using real estate investments to create paper losses that offset taxable income.
Philanthropy: By running a private family foundation, Karlton makes charitable donations that not only give back to the community but also reduce his taxable income.
These strategies have allowed him to legally pay little to no federal taxes while still building a substantial fortune. His unique approach to tax strategy has earned him a reputation as one of the leading experts in this field.
The Ferrari and the $7 Million Year
During an interview, Karlton shared an interesting story about his purchase of a Ferrari. After offsetting his taxes for the year, he decided to buy the car cash as a Christmas gift to himself. For most people, owning a Ferrari is the ultimate luxury, but for Karlton, it was just one of the rewards of building a business that thrives on smart financial strategies.
His income in 2023 surpassed $7 million, and in 2024, it’s projected to exceed $11 million. But what’s truly impressive is that Karlton’s total tax liability for 2023 was just $26,000 in state taxes, and in 2024, he plans to pay less than $92,000 in taxes despite his impressive earnings.
A Masterclass in Tax Strategy
Karlton’s expertise in tax strategy has made him a sought-after consultant for some of the biggest business owners in the world. He runs one of the largest YouTube channels dedicated to teaching tax strategies and wealth-building tactics. Through his content, Karlton educates entrepreneurs on how to use the tax code to their advantage, helping them keep more of their earnings.
He emphasizes that for many business owners, taxes are the biggest financial burden. Without proper planning, taxes can drain resources, leaving business owners with little to reinvest in their businesses. Karlton’s teachings focus on avoiding this pitfall and ensuring that entrepreneurs have the right strategies to keep their businesses growing. Clip here to watch instead!
How Karlton Dennis Uses Real Estate to Offset Taxes
One of the key strategies Karlton Dennis uses to reduce his taxable income is investing in specific real estate sectors — especially short-term rentals.
For full-time W2 earners or 1099 contractors, Karlton recommends leveraging short-term rental properties where tenants stay seven days or less. By actively managing the property for at least 100 hours per year, the rental qualifies as an active business in the eyes of the IRS.
This opens the door to applying a cost segregation study — a strategy that accelerates depreciation and creates a paper loss. That paper loss can then be used to offset W2 or 1099 income, significantly reducing (or even eliminating) your tax bill.
Karlton also highlights the potential of involving a non-working spouse. For instance, a stay-at-home partner can be designated as a real estate professional managing the property portfolio. This designation allows the household to treat the rental activities as an active business, enabling larger tax deductions through the same cost segregation method.
This approach is 100% legal, IRS-compliant, and extremely effective when structured correctly — a method Karlton has mastered and teaches to clients nationwide.
How Karlton Dennis Helps Clients Save $100s Millions in Taxes with Smart Structuring and Strategic Assets
Karlton Dennis reveals tax-saving strategies used by wealthy clients, including entity structuring, write-offs, and leveraging vehicles like the G-Wagon and Lamborghini for bonus depreciation.
Tax expert Karlton Dennis has saved his clients well over $100 million in taxes—and that number continues to grow. His approach isn’t just about finding loopholes; it’s about playing the tax game smarter, faster, and legally. Click here to watch
The Power of Proper Entity Structuring
One of Karlton’s first key strategies is entity structuring. Many self-employed individuals start out as sole proprietors or single-member LLCs, which works until their income hits around $50,000 to $60,000. At that point, Karlton recommends switching to an S Corporation.
Why? Because of the self-employment tax—15.3% that applies to all business profits in a sole proprietorship or LLC. But with an S Corp, you only pay that 15.3% on the salary you pay yourself. The rest of your business’s profit? Not subject to self-employment tax. This move alone can save thousands per year and is a game-changer for growing entrepreneurs.
Unlocking Hidden Write-Offs
Beyond structure, Karlton emphasizes the importance of recognizing what’s deductible. Many business owners don’t realize they’ve already spent money on things that qualify as write-offs. This could be anything from your cell phone, laptop, or even travel expenses that seemed personal but were actually for business.
Karlton’s team helps clients shift these overlooked expenses onto the business books, reducing taxable income and saving money. This method helps keep more money in the hands of entrepreneurs, allowing them to reinvest and grow.
Wealthy vs. Middle-Class Approach to Taxes
According to Karlton, one of the biggest differences between the middle class and wealthy individuals isn’t access to information—it’s speed. Wealthy clients don’t wait weeks or months to act on advice. They move within hours, sending wires, creating foundations, and setting up entities instantly. In contrast, the middle class often suffers from analysis paralysis, over-researching and delaying decisions. That delay can cost them significantly in tax savings.
Bonus Depreciation and Leveraging Luxury Cars
Karlton doesn’t just talk tax theory—he walks the walk. His use of bonus depreciation to offset taxes with luxury cars like the G-Wagon and Lamborghini SV is a prime example.
Despite luxury vehicles being considered depreciating assets, Karlton flips that narrative. He used bonus depreciation to write off $92,000 from a car purchase. That $92K in tax savings was then reinvested into a multifamily property in Texas, now bringing in around $1,400 per month in passive income.
The trick? The IRS allows full write-offs on vehicles with a Gross Vehicle Weight Rating (GVWR) of over 6,000 lbs—like the G-Wagon—if they’re used more than 50% for business. Thanks to Section 179 and 168(k) of the tax code, entrepreneurs can deduct the full or partial cost of qualifying vehicles in the year they’re placed in service.
Watching Bonus Depreciation Rates
Karlton utilized this strategy while bonus depreciation was at 100%, just before it dropped to 80% in 2023 and 60% in 2024. With political changes on the horizon, such as Donald Trump possibly returning to office, Karlton and other professionals are closely watching whether 100% depreciation might return. If so, entrepreneurs could have another golden window to use this powerful tax-saving tool.
Conclusion
Karlton Dennis is a living example of how a deep understanding of tax strategy can transform a business. He has successfully built a multimillion-dollar empire by leveraging the tax code to his advantage, all while giving back to the community through his philanthropic efforts. His story isn’t just about how to make money—it’s about how to keep it and ensure long-term financial success.
Karlton’s approach is a blueprint for any entrepreneur looking to scale their business while minimizing their tax burden. His journey shows that with the right knowledge, it’s possible to build wealth without the fear of excessive taxes weighing down your business.
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