Andrew Bary

Berkshire Hathaway made a huge tax payment to the U.S. government of $26.8 billion last year, but that's unlikely to be repeated in 2025 and beyond because it was largely related to the sale of highly appreciated Apple stock.

Like nearly all big companies, Berkshire does what it can to minimize its tax payments, and CEO Warren Buffett has found creative ways to do that in the past. The company is one of the biggest beneficiaries of federal tax credits for installing wind power.

In this annual shareholder letter released Saturday, Buffett wrote that during 2024, Berkshire "paid far more in corporate income tax than the U.S. government had ever received from any company -- even the American tech titans that commanded market values in the trillions." Its payment to the IRS was about 5% of all corporate taxes paid during 2024, he wrote.

Most of that tax stemmed from the sale of Apple stock, Barron's estimates. Berkshire said in its 10-K that it realized $101 billion of gains on sales of equity securities in 2024, up from $5 billion in 2023. Berkshire sold about two thirds of its Apple stake in 2024 -- around 600 million shares -- and ended 2024 with 300 million shares now valued at $74 billion, with Apple stock around $245 a share.

Barron's estimates that Berkshire realized about $90 billion of gains on the Apple stock and about $5 billion on its sale of Bank of America stock during 2024. We estimate that Berkshire realized an average price of about $185 a share for the Apple stock, against a cost basis of around $35 for the stake bought mostly from 2016 to 2018.

Berkshire would pay the corporate income tax rate of 21% on its capital gains -- subject to some potential adjustments.

Berkshire's total cash taxes paid in 2024 were $28.5 billion -- reflecting federal and state and local taxes -- up from $7.8 billion in 2023 and $4.2 billion in 2022, according to the 10-K.

The 2023 tax bill probably is more indicative of the run rate of Berkshire's cash tax bill.

Berkshire holders would have fared better if Buffett had kept the entire Apple stake. It may have paid $15 billion or more in taxes on the Apple sale and it has left what we estimate is about $35 billion on the table based on Apple's rally since the sales were made.

Berkshire's utility unit, Berkshire Hathaway Energy, is one of the largest producers of renewable power in the country and Berkshire gets a large federal tax credit for installing wind power. During each of the past two years, BHE has gotten about $2 billion of federal tax credits and has had a negative tax rate.

Berkshire also has been creative in avoiding capital gains taxes.

It swapped a long-held stake in Procter & Gamble worth about $4.5 billion in 2014 for P&G's Duracell battery business in a tax-free transaction that tax expert Robert Willens described as a "cash-rich split-off," a complex maneuver familiar to Buffett.

That avoided a big tax bill since Berkshire's cost was only about $300 million -- stemming from an investment in Gillette in the 1980s. P&G later bought Gillette.

It also swapped a long-held stake of about $1.5 billion in Graham Holdings, the former Washington Post Co., in 2014 for some Berkshire stock and a Miami TV station held by Graham. The Graham Holdings stake dated back to the 1970s, and Buffett's long association with the late Post chairman Katharine Graham and the stake had a minimal cost basis.

Write to Andrew Bary at andrew.bary@barrons.com

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February 23, 2025 12:32 ET (17:32 GMT)

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