Warren Buffett details tax savings on massive charitable contributions
Buffett pledged to distribute all of his Berkshire Hathaway shares to charity
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Billionaire investor Warren Buffett announced on Wednesday that he was halfway to his goal of distributing more than 99% of his net worth to charity, and he also detailed the tax savings he received along the way.
Buffett explained in a letter that in 2006 he pledged to distribute all of his Berkshire Hathaway shares to charity. At the time he owned 474,998 "A" shares and said on Wednesday he has about 238,624 shares, worth about $100 billion, to go.
The legendary investor noted that philanthropy is a hot topic, which he thought was appropriate because "all or a portion of philanthropic contributions can generate significant tax deductions for the donor."
"That benefit, however, is far from automatic," Buffett explained.
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Buffett said he gave 16 annual contributions to five foundations that were worth $41 billion when disbursed.
He said he has a relatively small income and explained that his wealth is tied up in the "tax-paying businesses" that he owns through his Berkshire stock holdings. One purpose of charitable deductions is to generally reduce your taxable income.
In his specific scenario, he said tax savings over the years have amounted to 40 cents per every $1,000 given.
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Buffett, however, is notorious for living a relatively frugal lifestyle despite his vast wealth.
"The income I receive from other assets allows me to live as I wish," Buffett said. "My needs are simple; what made me happy at 40 makes me happy at 90."
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Buffett recognized that deductions are important for many wealthy investors and said it is appropriate for lawmakers to regularly revisit tax policies for contributions because people can get "imaginative".