Ohtani’s Dodgers contract has $680 million deferred, lowering tax value to $46 million annually

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NEW YORK (AP) — 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 record-setting 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 baseball’s 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%.

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.

Betts has a $365 million deal covering 2021-32 that includes $115 million in deferred salaries payable from 2033-44 and has the final $5 million of his signing bonus payable from 2033-35.

Freeman has a $162 million, six-year deal for 2022-27 that includes $57 million in deferred money payable from 2028-40.

Los Angeles’ 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%.

Ohtani’s total dollars are 64% higher than baseball’s previous record, a $426.5 million, 12-year deal for Angels outfielder Mike Trout that began in 2019.

His $70 million average salary is 62% above the previous high of $43,333,333, shared by pitchers Max Scherzer and Justin Verlander with deals they struck with the New York Mets. Ohtani’s average salary nearly doubles the roughly $42.3 million he earned with the Angels. It also exceeds the entire payrolls of Baltimore and Oakland this year.

However, for the luxury tax he will count only slightly more than Aaron Judge, who is a $40 million annual charge to the Yankees’ payroll as he enters the second season of a $360 million, nine-year contract.

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AP MLB: https://apnews.com/hub/mlb

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