Shohei Ohtani’s $700M Contract Delivers Tax Benefits and Success
Shohei Ohtani, the two-way star of Major League Baseball, recently signed a groundbreaking contract with the Los Angeles Dodgers. The 10-year deal, valued at $700 million, was finalized in December 2023. This massive contract comes with significant tax benefits that could save Ohtani approximately $90 million in California state income tax.
Shohei Ohtani’s Recent Achievements
Since joining the MLB in 2018 with the Los Angeles Angels, Ohtani has made a remarkable impact. He was named the 2018 Rookie of the Year and has since earned five All-Star selections and three MVP awards. Currently, he is a favorite to win a fourth MVP.
- First player in MLB history to achieve a 50-50 season with 50 home runs and 50 stolen bases.
- Hit two home runs and two doubles during Game 3 of the 2025 World Series.
- Planned to pitch as the Dodgers’ starter for Game 4 in the World Series.
Ohtani’s dual threat as a pitcher and hitter places him among MLB’s elite. His recent performances have not only made headlines but have also captivated fans worldwide.
The Tax Benefits of Ohtani’s Contract
One key aspect of Ohtani’s contract is its unique structure that significantly reduces his tax liabilities. Under typical contracts, players receive a salary with an upfront signing bonus. However, Ohtani’s agreement stipulates that he will be paid $2 million annually over ten years, totaling $20 million during that period. The remaining $680 million will be deferred and paid between years 11 and 20.
Impact of State Income Tax
This deferral is advantageous due to California’s high state income tax, which tops out at 13.3%. Athletes like Ohtani face heavy taxation on their income in California. However, by deferring a large portion of his contract, Ohtani may be able to relocate to a state with no income tax, escaping the high state tax implications. States without income tax include:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
Future Implications for High Earners
Ohtani’s approach may serve as a model for other high-paid professionals, including doctors and executives, working in high-tax regions. The California Legislature is aware of this loophole and has attempted to introduce legislation to limit such tax benefits, but progress remains stalled.
The success of Ohtani and the Dodgers exemplifies how a carefully structured contract can lead to significant financial gains for athletes. As Ohtani continues his remarkable career, his contract strategy may inspire other players to seek similar opportunities.
