Shohei Ohtani’s $680 Million Deferral: Unexpected $44 Million Escrow Account Revealed

Published 12/14/2023, 11:40 AM EST

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Shohei Ohtani has surprised the sports world yet again. Even though his Dodgers contract is said to be $700 million, why is the CBT value of it $460 million? And if he’s deferring $68 million every year to the next decade, will that count in the LA Dodgers’ payroll then? There are too many questions, but a top insider is clearing up the confusion.

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This contract looks highly complex but it’s a result of some genius agent work. There are quite a few elements of it that deserve special attention. But how exactly does it benefit the Dodgers going forward?

Top Insider explains how the unique Shohei Ohtani contract works

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When baseball fans heard that Ohtani had deferred about 97% of his salary, many wondered if the Dodgers would have the whole $68 million to spend. Turns out they were just a little bit off as Joe Pompliano explained in his recent X post. Per the insider, the Dodgers have at most two years of freedom before Ohtani’s salary will start counting in their payroll due to the deferral rules.

The contract is quite simple – Shohei Ohtani has signed a $700 million contract. Still, due to an extremely high amount of deferral, the value of his contract for CBT purposes is $460 million. This takes Ohtani’s AAV to $46 million every year. It benefits the Dodgers as the AAV otherwise would have been a whopping $70 million. But this is where the real story starts.

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Now that Ohtani has deferred $68 million of his salary to the next decade, the Dodgers will have to maintain an escrow account for that deferred salary. So every year, LA will pay Ohtani $2 million and set aside another $44 million in this account, which will eventually add up interest and pay off his deferred amount.

Watch this story: Shohei Ohtani’s Close Aides Admit He Could Get a Clean Chit From Massive $11 Billion Scandal

Now as per CBA rules, teams have to start maintaining the account within two years of the contract. That means that the Blue Crew has a two-year buffer where they have the freedom to spend all the money they’ve saved. While of course, it works in the team’s favor, what about Shotime?

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The genius agent work of Nez Balelo

Ohtani is earning an additional $50 million from his endorsements. This contract defers his salary to the next decade and this is where things get exciting. The Japanese phenom can save a huge amount of tax once he starts getting his deferred salary if he shifts away from California.

The state currently taxes 13.3 percent to those earning over $1 million, which will increase to 14.4 percent from next year. Rules dictate that for the amount deferred for more than 10 years, the receiver pays tax in the state he resides in.

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What a win-win for both parties!

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Written by:

Sanskar Dubey

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One take at a time

“Rigidity leads to demise, while adaptability paves the path to vitality." Driven by a deep passion for sports, I’m glad I found baseball. Now serving as an MLB writer at EssentiallySports, I love to write about the thrilling tussle between the National League and American League throughout the season, although I may have a fondness for a particular Yankees icon named Alex Rodriguez.
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Edited by:

Arunima Bhanot

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