Many fans feel that sports contracts are getting out of control. League minimums are increasing, which is great, but with the growing popularity of respective sports, the monster contracts for the top athletes are jaw-dropping.
A recent trend for baseball has been marquee free agents signing 10-plus-year contracts. It feels like we took a huge jump regarding contracts ahead of the 2021 offseason. The Texas Rangers spent half a billion dollars on its middle infield when it signed Marcus Semien to a seven-year, $175 million deal and Corey Seager to a 10-year, $325 million contract.
Shohei Ohtani won the American League MVP in 2021 and 2023. He had already accomplished things nobody thought possible by being a two-way player who could both hit for power and be one of the best pitchers in the game.
The Los Angeles Angels chose not to trade Ohtani in 2023, instead trying to bring him back with a lucrative contract offer. That gambit didn't work out, as the Los Angeles Dodgers won the bidding war and signed baseball's most coveted prize.
Let's take a look at the contract that the Dodgers gave Ohtani, including a rare decision to include deferred payments.
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Shohei Ohtani contract breakdown
Ohtani signed a monumental 10-year, $700 million contract with the Dodgers. The sticker shock alone on seeing those numbers put together is unprecedented.
Ohtani didn't quite get a billion dollars like some predicted, but he got close. While the amount of the contract is already nuts, the way that it is being paid out is equally intriguing. Ohtani decided to defer the bulk of the money owed to him over the life of his contract and tacked it on to the end of the deal. It really helps Los Angeles in the short term with regard to its salary cap, but it's very important to note that Ohtani will still count for $46 million toward the team's luxury tax.
For the length of his current contract with the Dodgers, Ohtani will only cost $2 million against the cap.
Shohei Ohtani contract length
Ohtani is under contract with the Dodgers through 2033. He will turn 38 in the final year of the deal. For the 2024 season, there were only 14 active players who were 38 or older. Nine were pitchers.
Shohei Ohtani deferred payments, explained
Ohtani was set to make $70 million per year for 10 years. This would mean the Dodgers would start paying him in 2024, and he would finally come off the books in 2034. To avoid this locking up Los Angeles finances, Ohtani agreed to deferred payments that would run until 2043.
These payments help the Dodgers' cap flexibility during his contract and really help Ohtani because the payment amount he will earn each year shoots up the year after his contract ends. So, even if he were to sign for a smaller deal somewhere else, Los Angeles will still be paying him an exorbitant amount of money.
| Year | Salary |
| 2024 | $2 million |
| 2025 | $2 million |
| 2026 | $2 million |
| 2027 | $2 million |
| 2028 | $2 million |
| 2029 | $2 million |
| 2030 | $2 million |
| 2031 | $2 million |
| 2032 | $2 million |
| 2033 | $2 million |
| 2034 | $68 million |
| 2035 | $68 million |
| 2036 | $68 million |
| 2037 | $68 million |
| 2038 | $68 million |
| 2039 | $68 million |
| 2040 | $68 million |
| 2041 | $68 million |
| 2042 | $68 million |
| 2043 | $68 million |
Why did Shohei Ohtani defer $680 million of his contract?
Aside from the financial flexibility it gives the Dodgers during Ohtani's prime years, it's been theorized that the Japanese star chose to defer the massive bulk of his contract until after he moved out of California. The reason is simple: Taxes.
California has the highest state income tax rate for someone earning the type of money Ohtani is: 13.3 percent. For comparison, the next highest state is Hawaii at 11 percent, and most states are well below 8.0 percent. Eight states have no state income tax, including three that currently have MLB teams (Florida, Texas, Washington).
If Ohtani was taxed at California's current top tax rate at the full value of his contract, he would wind up paying California about $93.1 million. With the way his current deal is structured, he will owe around $2.66 million.
Some state lawmakers are seeking to close that "loophole," but for the time being, Ohtani is set up to keep significantly more of his money — while enjoying a better team around him — by structuring his deal in such a unique way.
