An Extra Helping

Followers of Warren Buffett were treated to an extra helping of his signature folksy wisdom this holiday season. The 95-year-old Chairman of Berkshire Hathaway released his inaugural Thanksgiving letter, serving readers with personal anecdotes about his Midwestern childhood and reiterating confidence in his successor, Greg Abel. True to form, Buffett didn’t miss the opportunity to describe Berkshire’s portfolio of businesses as having merely “moderately better-than-average prospects.”

In his characteristically humble fashion, Buffett spent much of the letter deflecting the label of “self-made.” Instead, he credits his massive success to his luck and business partners. He views his fortune not as a personal triumph, but to be duly returned to benefit the health and welfare of others. Accordingly, he has pledged to give away 99% of his wealth to philanthropic causes, primarily through foundations directed by his children.

Buffett’s reminder about the importance of philanthropy arrives at a relevant moment for American charity. While the total dollar volume of U.S. philanthropic activity rose to nearly $600 billion last year, the number of active donors is in decline, especially among “micro-donors” giving less than $100. According to a study by Indiana University, two-thirds of American households made charitable contributions in the year 2000. By 2018, that proportion had fallen below 50% and continues to slide. Nonprofits are increasingly reliant on a smaller circle of ultra-wealthy donors.

For those fortunate enough to give back, the window before the end of 2025 offers an opportunity to maximize the impact of every dollar. The One Big Beautiful Bill Act (OBBBA), signed into law in July, introduces strict changes to charitable giving for the 2026 tax year:

• Deduction Floor: The legislation introduced a new 0.5% floor for charitable deductions. For an earner with $1 million in income, the first $5,000 of gifts will become non-deductible.
• Rate Cap: OBBBA also sets a deduction cap for high earners. For taxpayers in the 37% bracket, charitable gifts will be deductible at a maximum rate of 35% starting in 2026.

For philanthropically inclined individuals, particularly those too young to utilize Qualified Charitable Distributions (QCDs) from IRAs, accelerating giving into the 2025 calendar year could offer significant advantages.

Often, the most tax-efficient move is to contribute appreciated stock directly to a charity. This allows the donor to deduct the full fair market value of the asset while simultaneously eliminating the capital gains tax that would be triggered if the stock were sold.

Furthermore, investors can look at “bunching” contributions via a Donor Advised Fund (DAF). By making a large, lump-sum contribution to a DAF in 2025 that covers multiple years of planned giving, givers can lock in the current, more favorable deduction rules now. They then retain the flexibility to distribute those funds to specific charities over the next several years, long after the tax laws have tightened.

Because individual tax situations vary, it is vital to consult a CPA to run the numbers. While few of Buffett’s readers can match his financial footprint, his sentiment remains a timely guide for the season: “When you help someone in any of thousands of ways, you help the world.”

Cam Simonds