Ohtani’s deal tax Dodger
Record contract has $680 million deferred
Shohei Ohtani will receive just $20 million of his $700 million contract with the Los Angeles Dodgers over the next 10 years, with $680 million payable from 2034-43 in an unusual structure that gives the team greater payroll flexibility in coming seasons.
Ohtani’s deal, agreed to Saturday, calls for annual salaries of $70 million, according to details obtained by the Associated Press. Of each year’s salary, $68 million is deferred with no interest, payable in equal installments each July 1 from 2034-43.
For purposes of the luxury tax, the contract is valued as a yearly addition to the Dodgers’ payroll of about $46 million. Under the collective bargaining agreement, for the calculation of a team’s tax payroll the value of deferred money is discounted at the federal mid-term rate. For all agreements this offseason, the discounting will be at the October 2023 rate of 4.43 percent.
Ohtani’s contract, combined with those of Mookie Betts and Freddie Freeman, raises the Dodgers’ total of deferred money owed to the three to $857 million from 2033-44.
Los Angeles’s high points of the deferred payments are 2038 and ’39, when the trio will be owed $83 million, and 2040, when they will be due $84 million.
By receiving the vast majority of the money when he presumably will not be living in the United States, Ohtani also figures to have a tax benefit. California’s top tax rate for residents is 13.3 percent.
Also Monday, reliever Joe Kelly appears to be switching uniform numbers after finalizing his $8 million, one-year contract, opening No. 17 for Ohtani. The 35-year-old former Red Sox reliever was listed as No. 99 by the Dodgers on Monday, then No. 58 (which he wore in St. Louis from 2012-14) and then without a number.