Shohei Ohtani, the star player for the Los Angeles Dodgers, has made headlines with his groundbreaking 10-year, $700 million contract signed in December 2023. This contract is not just monumental in terms of salary; it also offers significant tax advantages.
Shohei Ohtani’s Contract and Tax Benefits
The unique structure of Ohtani’s contract allows him to defer a substantial portion of his earnings. Specifically, he will receive only $2 million each year for the first ten seasons, totaling $20 million. The remaining $680 million will be paid after the contract ends. This deferral strategy provides an opportunity for Ohtani to potentially avoid around $90 million in California state income tax.
- Years of Contract: 10 years
- Total Contract Value: $700 million
- Annual Salary: $2 million for the first decade
- Deferred Payment: $680 million after Year 10
- Potential Tax Savings: $90 million
Impact of California’s Income Tax
California imposes a top marginal income tax rate of 13.3%, which significantly affects high-income earners like Ohtani. This tax rate, combined with federal taxes, makes California one of the most expensive states for income taxation. However, the structure of Ohtani’s contract allows him to sidestep some of these tax burdens if he relocates to a no-income-tax state after his playing career.
Shohei Ohtani’s Dominance on the Field
Since entering Major League Baseball (MLB) with the Los Angeles Angels in 2018, Ohtani has established himself as one of the league’s most electrifying players. He was named the 2018 Rookie of the Year and has since earned five All-Star selections and three Most Valuable Player (MVP) Awards.
During the 2024 season, Ohtani made history by becoming the first MLB player to achieve 50 home runs and 50 stolen bases in a single season, a feat known as joining the “50-50 club.” His remarkable performance continued into the 2025 World Series, where he contributed significantly with two home runs and two doubles in a pivotal Game 3.
Ohtani’s Cultural Impact
Beyond the field, Ohtani has gained immense popularity, becoming a cultural icon and influencing the branding landscape for MLB players. His ability as both a pitcher and a hitter has created lasting interest, positioning MLB for greater international reach.
The Future of MLB Contracts
Ohtani’s contract strategy raises questions about future player agreements. The potential for high-earning athletes to defer income payments while playing in high-tax states could reshape financial planning in sports and beyond. The California Legislature is aware of this tax loophole, primarily through efforts led by Josh Becker, but legislative changes have yet to materialize.
In conclusion, Shohei Ohtani’s $700 million contract showcases innovative financial strategies within MLB and heralds a new age of player contracts. His ongoing success and cultural impact position him as a significant figure in sports history.
