Key Highlights
- Shohei Ohtani signed a 10-year $700 million contract with the Los Angeles Dodgers in December 2023.
- This contract includes a unique tax-advantaged structure, allowing Ohtani to avoid paying around $90 million in California state income tax.
- The tax advantage is due to deferred payments and the potential for relocating to a state with lower or no income taxes after his playing career ends.
- Ohtani’s contract deferral has implications for other high-compensated individuals working in high-tax states, potentially setting a precedent for tax planning strategies.
The Dominance of Shohei Ohtani: A Baseball Phenomenon
Shohei Ohtani’s emergence as one of the most dominant players in Major League Baseball (MLB) began with his rookie year in 2018, where he played for the Los Angeles Angels. Since then, Ohtani has established himself not only as a formidable player but also as an industry trendsetter. His performances have been nothing short of spectacular; he was named Rookie of the Year in 2018 and has since earned five All-Star selections, three Most Valuable Player (MVP) awards, and a World Series championship title with the Los Angeles Dodgers.
Most recently, Ohtani made headlines during Game 3 of the 2025 World Series.
In this game, he hit two home runs and two doubles, leading his team to an 18-inning victory over the Toronto Blue Jays. The Blue Jays opted to intentionally walk him three times rather than face a potential home run or a double-play threat, illustrating just how valuable Ohtani is on the diamond.
A Tax-Advantaged Contract: How It Works
In December 2023, Ohtani signed a $700 million contract with the Los Angeles Dodgers for a ten-year period, which was to begin in the 2024 season. The structure of this contract includes two distinct payment phases: immediate and deferred payments.
According to the terms outlined by NBC News, Ohtani’s contracted payments are $2 million annually over the next decade, totaling $20 million. However, the remaining $680 million is set to be paid off after his contract ends during years 11 through 20.
This deferred payment structure significantly reduces his immediate tax burden and provides substantial long-term financial benefits.
The key advantage lies in the state income taxes. California, where the Dodgers play their home games, has a top marginal tax rate of 13.3%. If Ohtani relocates to a state with no income tax or low rates after his playing career ends, he can avoid paying this significant tax on the deferred portion of his contract, saving approximately $90 million in taxes.
The Broader Implications
While the primary beneficiary of this arrangement is Ohtani himself, it raises broader questions about compensation structures and tax planning for high-compensated athletes. Similar contracts may become more common as players seek to optimize their financial positions through tax-efficient strategies. The Dodgers, who are in their second consecutive World Series appearance, benefit from having a player of Ohtani’s caliber.
The California Legislature has attempted to address this issue by introducing SJR 14, which aims to limit the state tax benefits associated with deferred compensation contracts.
However, as of October 28, 2025, no progress has been made on this legislation, and athletes like Ohtani continue to enjoy these advantageous terms.
The potential for other high-paid individuals, such as doctors, lawyers, or business executives working in high-tax states, to adopt similar strategies makes this an intriguing case study. Ohtani’s contract deferral could serve as a blueprint for tax avoidance and financial planning for top-tier professionals seeking to optimize their after-career earnings.
