Shohei Ohtani and the $680 Million Deferral

The biggest contract in sports history was signed by a player who asked not to be paid until 2034. Why he did it, how present value works, and what the Dodgers bought with the money it freed up

9/16/20264 min read

In December 2023, Shohei Ohtani signed with the Los Angeles Dodgers for ten years and $700 million. It was the largest contract in sports history, averaging $70 million a season. Two days later the fine print came out: of those $70 million a year, Ohtani defers $68 million. During the ten years of the deal he earns $2 million a season, $20 million in total. He will receive the other $680 million between 2034 and 2043, without interest, when he is probably no longer playing.

In a normal negotiation, the player asks for more money, sooner. Ohtani asked for the opposite.

It was his idea

According to his agent, Nez Balelo, the proposal came from Ohtani himself. The goal was to lower how much his contract weighs on the team’s books and give the Dodgers room to build around him.

Tom Verducci of Sports Illustrated reported how the offer arrived. On December 7, Balelo pitched it to Andrew Friedman, the Dodgers’ president of baseball operations. After hanging up, Friedman called club CEO Stan Kasten and let out a surprised expletive. Kasten asked whether that was good or bad. “Good. Very good,” Friedman replied. He later admitted he would never have had the nerve to propose it himself.

The contract has another clause that says a lot about how Ohtani thinks: he can leave if Friedman or controlling owner Mark Walter leave their roles. He didn’t just sign with a team. He signed with the people running it.

Why $700 million counts as $460 million

Present value measures how much money you’ll receive in the future is worth today. Because money loses value over time, getting $68 million ten years from now is the same as getting about $44 million today, using the 4.43% interest rate set by MLB’s labor agreement. Add the $2 million Ohtani does collect each season, and his contract counts as about $46 million a year, not $70 million. In total, the $700 million is worth about $460 million today, according to FanGraphs. Ohtani will still collect the full $700 million; what changes is how much it counts for today.

Why it matters: the luxury tax

MLB has no hard salary cap like the NBA or NFL. It has a competitive balance tax, known as the luxury tax. When a team’s payroll goes over a threshold ($237 million in 2024), the club pays a surcharge on every dollar above it. The surcharge grows the further over it goes and the more consecutive years it does so.

That tax doesn’t look at what the club pays each year but at the present value of its contracts. That’s why Ohtani’s deal counts as about $46 million a season instead of $70 million. That’s $24 million of room every year that the Dodgers can spend on other players without their tax bill soaring.

What the Dodgers did with that room

They used it quickly. That same winter they signed Japanese pitcher Yoshinobu Yamamoto for 12 years and $325 million, plus a $50 million posting fee to his team in Japan. They also traded for pitcher Tyler Glasnow and extended him. According to CBS Sports, they committed about $1.145 billion in contracts that offseason.

The approach became a system. According to ESPN, by December 2024 the Dodgers owed a little over 1billionindeferredpaymentstoeightplayers,duebetween2028and2046.BesidesOhtani,playerswithdeferredmoneyincludeMookieBetts(115 million), Blake Snell (66million),FreddieFreeman(57 million) and Will Smith ($50 million). The next team on the list, the Mets, owed $137 million. Friedman called the criticism “kind of a lazy narrative.”

The result on the field: the Dodgers won the 2024 World Series against the Yankees and the 2025 World Series against the Toronto Blue Jays, in Game 7.

How to live on $2 million a year

The obvious question is how Ohtani can afford to take so little from his team. The answer is off the field. According to Sportico, in 2026 he will earn about $125 million from endorsements and memorabilia, against his $2 million salary. During this decade, his Dodgers contract is the small part of his income.

Those endorsements benefit the club too. According to SponsorUnited, cited by Forbes, the Dodgers added 12 Japanese sponsors in 2024 and about $70 million in extra sponsorship revenue. They include All Nippon Airways, Yakult, Toyo Tires and Daiso.

The California tax debate

In the United States, salary is taxed when it’s paid, not when it’s signed. Today Ohtani pays tax on his $2 million salary and on everything he earns from endorsements, about $125 million in 2026 according to Sportico. The $680 million in deferred money will be taxed between 2034 and 2043, as he collects it.

The question is where he’ll live by then. California has one of the highest income taxes in the country. But a federal law (4 U.S.C. § 114) bars a state from taxing deferred income of someone who no longer lives there, if it’s paid in regular installments over at least ten years, as in this case. If Ohtani moves before 2034, for example to a state with no income tax or to Japan, California would lose that share. The California Center for Jobs and the Economy puts it at up to $98 million. Ohtani has never said he plans to leave.

State Controller Malia Cohen asked Congress to limit these kinds of payments. In April 2024, the California State Senate passed a resolution along the same lines. So far the federal law hasn’t changed, and any dispute wouldn’t come for a decade.

The union stands behind it

Some saw the contract as a way around the spirit of the luxury tax. The players’ union did not. Its executive director, Tony Clark, told the Los Angeles Times that they want players to have “as many tools in the tool bag” as possible. He also said deferring money is a right each player can use “in the fashion that they deem fit,” just as another can ask to be paid everything up front.

What Ohtani bought

From the outside, the contract looks like a sacrifice. From the inside, it’s an investment. Ohtani’s finances were already secured through other means. What he didn’t have, after six seasons with the Los Angeles Angels without playing a single playoff game, was a team that could win.

So he used the one thing a player can offer and a club can’t buy: time. He gave up getting paid now so his team could spend now. Two World Series later, the bet has paid off.