Shohei Ohtani’s Pay Day

Baseball pitcher Shohei Ohtani recently signed a $700M, 10 year contract with Dodgers.

The interesting part of this deal is he’s opting to defer the majority of the contract value ($680M), and only collect $2M per year for the initial 10 year period. After that, he will collect the remaining at $68M per year (with interest) over the following 10 years.

This arrangement is unique for the MLB - no other player has taken massive deferrals like this before.

Part of the reason Ohtani agreed to this is to help the Dodger’s with cash flow. By taking a smaller amount over the next 10 years, they will have the funds to both pay other players more AND it will reduce the amount they need to pay on the Competitive Balance Tax (a special tax in the MLB when payroll is over a certain threshold).

Additionally, if Ohtani retires and moves to a lower-tax state when he collects his deferrals, he could have substantial tax savings there as well.

Another consideration - Ohtani is currently at the top of his game, so he is rolling in endorsement deals. It’s estimated for 2023 he made over $35M from that alone (comparatively, no other MLB player makes over $5M from deals). So he will easily be able to supplement his $2M/year income with money from that.