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Awards season coincides with tax season in the US, and as millions of middle-class Americans use the many awards shows to distract from the tedium of filing their returns, I can’t help but wonder how the two worlds mesh.
After all, the rich and famous pay taxes too, okay – but how? I don’t know any A-listers, so I turned to ChatGPT for information.
Also see six big ways ChatGPT can help with your 2026 tax filing.
How do you do it vs how do they do it
ChatGPT began by explaining that since middle-class people typically rely on W-2 salary income and the occasional 1099 side stream, they have much less control over their tax structure than wealthy celebrities, citing Dwayne Johnson, Taylor Swift, and Kim Kardashian as highly visible examples who “rarely earn just paycheck to paycheck.”
Instead, their wealth comes from a variety of sources. Here are some:
- Business Income (LLC, S-Corporation)
- royalty
- licensing deals
- brand endorsement
- travel income
- production companies
- Investments (real estate, startups).
Celebrity is brand and brand is business
While middle-class Americans typically work for other people’s businesses or may even own their own, household-name mega-stars Are Businesses that generate revenue through their own debt-free companies, S-corporations, production companies, and personal brand LLCs.
ChatGPT used the following example to illustrate how celebrities use their self-branded businesses to control their tax structures.
- An actor earns 10 million dollars.
- Earnings are paid to the actor’s LLC.
- The LLC pays the actor a salary of $1 million.
- The remaining $9 million is subject to separate taxes.
In contrast, ChatGPT said most middle-class workers have no such flexibility because their entire salary is taxed as ordinary income.
Celebrities cut out things people with normal incomes can’t do
Next, ChatGPT explained that in some cases celebrities can claim several larger deductions that salaried and salaried employees cannot, known as the “big difference” at tax time:
- stylist
- trainers
- Travel
- Security
- assistants
- PR teams
- home studio
- Wardrobe (if related to display)
- Private jet (business use).
It’s all in the tax strategies
ChatGPT explains how celebrities use their unique tax flexibilities to reduce their liability to the IRS with the following strategies.
- Many wealthy celebrities derive most of their income from qualified dividends, long-term capital gains, and business equities, which enjoy more favorable tax treatment than the ordinary income on which most middle-class people rely.
- Many A-listers invest heavily in real estate, which they use to offset income through depreciation, cost separations, asset losses, and 1031 exchanges.