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Ohtani deferred MLB money delays most of California’s potential tax collection

December 12, 2023
Shohei Ohtani Angels pitcher on the mound_Wikipedia

Wikipedia photo

U.S. sports fans this time of year are focused on football. We're in the midst of the NFL season (how 'bout them Cowboys thumping the Eagles on Sunday night?!) and the NCAA bowl season is on the horizon.

But a baseball player has many of us talking.

Shohei Ohtani, the phenomenal two-way player touted as the modern-day Babe Ruth, set yet another record, this time off the field. The Japanese pitcher-slugger signed a $10-year, $700 million deal with the Los Angeles Dodgers that shatters all prior major league records.

It's the biggest deal not just for an MLB player, but in of U.S. team sports.

But here's the really interesting part. The bulk of Ohtani's money, $680 million, will be deferred. He's reportedly getting "just" $2 million a year for 10 years, with the remaining millions to be paid out starting in in 2034, after his 10-year contract with the L.A. team expires, and running to 2043.

Eric Fisher has the details on the arrangement in his Front Office Sports story. It's a good read on how the deal is set up to free up ostensible Ohtani money so the Dodgers can add more players to help the superstar finally participate in, and he and the Dodgers hope, finally win some playoff games.


Potential lower Ohtani personal taxes: And of course, there's a tax angle.

I'm not just talking the MLB's so-called competitive balance tax that affects the teams' finances.

I'm talking Ohtani's personal taxes. Since all of his home games, along with some away match-ups, will be in California, Ohtani will end up handing over a portion of his earnings to the Golden State treasury.

And it will be a substantial portion. California's top tax rate for millionaire's is 14.4 percent.

Of course, as Fisher notes, if Ohtani decides to retire after a decade in Dodger blue and stay in the United States, a move to a lower or no tax state could make that deferred $680 million last even longer.

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TAX-SAVVY WAYS 
TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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