How Much Money Does Shohei Ohtani Make? Shohei Ohtani’s groundbreaking contract with the Los Angeles Dodgers has captivated the sports and finance worlds alike, prompting many to wonder about the specifics of his earnings. Money-central.com breaks down Ohtani’s complex financial arrangement, explores the nuances of his deferred payments, endorsement deals, and tax implications to provide a clear picture of his income and how he maximizes his financial potential. Prepare to dive into the world of sports finance with us, where we offer insights on financial planning, investment strategies, and wealth management.
1. What is Shohei Ohtani’s Historic Contract With the Dodgers?
Shohei Ohtani’s historic contract with the Los Angeles Dodgers is valued at $700 million over 10 years. This groundbreaking deal not only makes him one of the highest-paid athletes in the world but also introduces a unique structure with significant deferred payments.
The Record-Breaking Deal
Ohtani’s $700 million contract shattered previous records in baseball, surpassing Mike Trout’s 12-year, $426.5 million deal. It also exceeds Patrick Mahomes’ $450 million contract in the NFL, making it the largest in North American sports. While Lionel Messi’s deal with Barcelona FC was reportedly worth more, it included bonuses that were not fully earned.
Deferred Payments: A Closer Look
One of the most intriguing aspects of Ohtani’s contract is the deferral of $68 million per year. He will receive an annual salary of $2 million, with the remaining $68 million paid out in installments between 2034 and 2043, without interest.
This structure has significant implications for both Ohtani and the Dodgers:
- For Ohtani: While he receives a lower annual payout during the contract term, he potentially benefits from lower state income taxes if he leaves California after his contract expires, thanks to Title 4, Section 114 of the Internal Revenue Code.
- For the Dodgers: The deferred payments reduce the net present value of the contract for Competitive Balance Tax (CBT) purposes, allowing the team to manage their luxury tax bill more effectively.
Why Defer Payments?
According to Ohtani’s agent, Nez Balelo, the deferrals were Ohtani’s idea to provide the Dodgers with financial flexibility to sign other talented players and build a competitive team. Ohtani echoed this sentiment, stating that he wanted to help the Dodgers improve their roster.
2. How Does Shohei Ohtani’s Salary Compare to Other Top Athletes?
Shohei Ohtani’s $70 million annual salary ranks among the highest in sports, but it’s important to compare it to other top athletes across different leagues to get a clearer picture.
MLB Comparisons
Ohtani’s average annual salary surpasses those of Max Scherzer and Justin Verlander, who previously held the record at $43.33 million. Aaron Judge’s nine-year, $360 million contract is another notable comparison in MLB.
Global Soccer Stars
Several global soccer icons, including Cristiano Ronaldo, Karim Benzema, Kylian Mbappe, and Neymar, earn more than Ohtani annually. However, Ohtani’s $70 million salary is the highest in North American sports.
NBA and NFL Stars
Lionel Messi’s deal with Inter Miami is worth approximately $60 million per year, including a stake in the team. In the NBA, Nikola Jokic has the top contract at $55.2 million annually, while Jaylen Brown and Giannis Antetokounmpo are set to earn even more in their upcoming deals.
In the NFL, Joe Burrow and Justin Herbert are the highest-paid players based on average salary, with significant signing bonuses.
Ohtani’s Unique Financial Position
Ohtani’s financial situation is unique due to his substantial endorsement earnings, which supplement his baseball salary. This combination of on-field and off-field income places him among the highest-earning athletes globally.
3. What is the Impact of Deferred Salary on Luxury Tax and Team Finances?
The deferred salary component of Shohei Ohtani’s contract significantly impacts the Los Angeles Dodgers’ luxury tax obligations and overall team finances.
Understanding the Luxury Tax
Major League Baseball’s Competitive Balance Tax (CBT), commonly known as the luxury tax, is a system designed to limit spending by the highest-revenue teams. Teams exceeding the tax threshold face penalties, including financial levies and restrictions on draft picks.
How Deferrals Lower the CBT Value
Ohtani’s deferred payments reduce the net present value of his contract for CBT purposes. Instead of counting as $70 million annually, the contract is valued at $46 million per year for luxury tax calculations. This allows the Dodgers to remain under the CBT threshold and avoid hefty penalties.
Dodgers’ History with the Luxury Tax
The Dodgers have been repeat offenders of the luxury tax, paying it in most years since 2013. Ohtani’s contract structure helps them manage their CBT bill while still acquiring a top-tier player.
Financial Flexibility
The reduced CBT value gives the Dodgers more financial flexibility to sign other players and strengthen their roster. As Ohtani himself noted, the deferrals were intended to help the team build a better team around him.
MLB Regulations on Deferred Compensation
MLB has specific rules governing deferred compensation, requiring teams to fully fund the deferred obligations in an amount equal to the present value of the total obligation. The funds must be set aside for the sole purpose of funding the deferred payments, but owners have flexibility in how they invest those funds.
4. How Do Endorsement Deals Contribute to Shohei Ohtani’s Total Earnings?
Endorsement deals play a crucial role in Shohei Ohtani’s total earnings, significantly boosting his income beyond his baseball salary.
Unprecedented Endorsement Earnings
In 2023, Ohtani’s endorsement earnings were estimated at $40 million per year, surpassing his baseball salary and making him the top earner in MLB. This is nearly six times more than Bryce Harper, the second-highest earner off the field, and four times more than Derek Jeter made at his peak.
Key Endorsement Partners
Ohtani has a diverse portfolio of endorsement partners in the U.S. and Japan, including BOSS, Fanatics, Kowa, and Seiko. In January, he signed a long-term footwear and apparel deal with New Balance, further solidifying his brand presence.
Comparison to Other Athletes
Ohtani’s endorsement earnings are more akin to those of top NBA or soccer stars than typical MLB players. His marketability and global appeal make him an attractive partner for major brands.
Impact of Joining the Dodgers
Joining the Los Angeles Dodgers and the prospect of regular postseason appearances are expected to further boost Ohtani’s endorsement earnings. His visibility and exposure on a high-profile team will likely attract new endorsement opportunities.
Maximizing Earning Potential
Ohtani’s unique combination of on-field performance and off-field appeal allows him to maximize his earning potential through endorsements, solidifying his position as one of the highest-paid athletes in the world.
5. What are the Tax Implications of Shohei Ohtani’s Contract?
Shohei Ohtani’s contract has significant tax implications, both for him personally and for the Los Angeles Dodgers.
Personal Income Taxes
Ohtani could potentially avoid significant personal income taxes, particularly in California, where the top marginal rate is high. By deferring a large portion of his salary, he may be able to reduce his state income tax liability if he leaves California after his contract expires.
Nonresident Tax Rules
Title 4, Section 114 of the Internal Revenue Code states that a state cannot impose income tax on retirement income of a person who does not reside in that state, including nonqualified deferred compensation plans.
California Franchise Tax Board
The California Franchise Tax Board has stated that nonresidents are generally taxable on California source income, including wages paid to a nonresident who performed services in California. However, the timing of payments and the determination of taxable California source income are fact-specific and depend on the terms of the compensation agreement.
Tax Expert Analysis
Tax experts like Robert Raiola have provided detailed analyses of the income tax consequences surrounding Ohtani’s contract, highlighting the potential tax benefits of the deferred payment structure.
Dodgers’ Tax Obligations
The Dodgers also face tax implications related to Ohtani’s contract, including payroll taxes and the Competitive Balance Tax. The deferred payments help reduce the net present value of the contract for CBT purposes, allowing the team to manage their luxury tax bill more effectively.
6. How Does Ohtani’s Contract Affect the Dodgers’ Ability to Sign Other Players?
Shohei Ohtani’s contract, with its unique deferred payment structure, significantly impacts the Los Angeles Dodgers’ ability to sign other players and maintain a competitive roster.
Increased Financial Flexibility
The deferred payments reduce the net present value of Ohtani’s contract for Competitive Balance Tax (CBT) purposes. This means that instead of counting as $70 million annually, the contract is valued at $46 million per year for luxury tax calculations. This increased financial flexibility allows the Dodgers to pursue other high-profile players without exceeding the CBT threshold.
Attracting Talent
By having more financial flexibility, the Dodgers can attract top-tier talent to complement Ohtani and strengthen the team. This can lead to a more competitive roster and increased chances of success in the playoffs.
Strategic Roster Construction
The Dodgers can strategically construct their roster by allocating resources to different positions and addressing areas of need. Ohtani’s contract structure allows them to balance their spending and maintain a well-rounded team.
Ohtani’s Commitment to Team Success
Ohtani himself has emphasized his commitment to team success, stating that he wanted to defer as much money as possible to help the Dodgers sign better players and build a better team. This aligns with the Dodgers’ goal of winning multiple World Series titles.
Long-Term Competitiveness
The ability to sign other players and maintain a competitive roster is crucial for long-term success. Ohtani’s contract structure helps the Dodgers achieve this goal, ensuring that they remain a contender for years to come.
7. What Other Contract Provisions are Included in Shohei Ohtani’s Deal?
In addition to the record-breaking salary and deferred payments, Shohei Ohtani’s contract includes several other notable provisions.
Full No-Trade Clause
Ohtani’s contract includes a full no-trade clause, giving him complete control over his destination. He cannot be traded to another team without his consent.
Opt-Out Clause
While Ohtani does not have traditional opt-out clauses, he has a “key man” provision in his deal. This allows him to opt out of the contract if there are changes in the Dodgers’ personnel, specifically if president of baseball operations Andrew Friedman or controlling owner Mark Walter leave the team.
Luxury Suite and Interpreter
Ohtani’s contract includes a luxury suite at Dodgers Stadium, providing him with a comfortable and private space during games. He also receives an interpreter to assist with communication.
Charitable Donation
Ohtani will donate to a Dodgers charity an amount not to exceed 1% of the contract, demonstrating his commitment to giving back to the community.
Influence on Contract Negotiations
These additional contract provisions highlight Ohtani’s influence and bargaining power, setting a new standard for player contracts in MLB.
8. How Does Shohei Ohtani Manage His Finances?
While the specifics of Shohei Ohtani’s personal financial management are private, we can infer some strategies based on his contract structure and endorsement deals.
Professional Financial Advisors
It is highly likely that Ohtani employs a team of professional financial advisors, including accountants, financial planners, and investment managers, to help him manage his wealth.
Strategic Tax Planning
Ohtani’s deferred salary structure suggests a strategic approach to tax planning, potentially minimizing his state income tax liability.
Diversified Investments
Given his substantial income, Ohtani likely has a diversified investment portfolio that includes stocks, bonds, real estate, and other assets.
Endorsement Management
Ohtani’s endorsement deals are managed by his agents and marketing team, ensuring that he aligns with reputable brands and maximizes his earning potential.
Philanthropy
Ohtani’s commitment to donating to a Dodgers charity demonstrates his philanthropic values and responsible financial management.
Long-Term Financial Security
By employing these strategies, Ohtani can ensure his long-term financial security and build a lasting legacy both on and off the field.
9. What Lessons Can We Learn From Shohei Ohtani’s Financial Success?
Shohei Ohtani’s financial success offers valuable lessons for individuals looking to improve their own financial situations.
Strategic Planning
Ohtani’s contract structure demonstrates the importance of strategic financial planning, including tax optimization and long-term wealth management.
Negotiation Skills
Ohtani’s ability to negotiate a record-breaking contract with unique provisions highlights the importance of strong negotiation skills in maximizing earning potential.
Diversification
Ohtani’s diverse income streams, including salary and endorsements, illustrate the benefits of diversification in building wealth.
Professional Advice
Ohtani’s likely reliance on professional financial advisors underscores the value of seeking expert guidance in managing complex financial matters.
Financial Discipline
Ohtani’s commitment to philanthropy and long-term financial security demonstrates the importance of financial discipline and responsible decision-making.
Focus on Long-Term Goals
Ohtani’s willingness to defer salary for the benefit of the team reflects a focus on long-term goals and priorities, both on and off the field.
10. How Does Shohei Ohtani’s Contract Compare to Other Historic Sports Deals?
Shohei Ohtani’s $700 million contract is not only historic in baseball but also ranks among the largest sports deals of all time.
Comparison to Other MLB Contracts
Ohtani’s deal surpasses Mike Trout’s 12-year, $426.5 million contract as the largest in MLB history. It also exceeds other notable contracts, such as Giancarlo Stanton’s 13-year, $325 million deal.
Comparison to NFL Contracts
Ohtani’s contract exceeds Patrick Mahomes’ $450 million contract in the NFL, making it the largest in North American sports. However, NFL contracts are often structured differently, with signing bonuses and guaranteed money playing a significant role.
Comparison to NBA Contracts
While NBA contracts have grown significantly in recent years, Ohtani’s deal surpasses even the largest NBA contracts in total value.
Comparison to Soccer Contracts
Lionel Messi’s deal with Barcelona FC was reportedly worth more than Ohtani’s contract, but it included bonuses that were not fully earned. Other soccer stars, such as Cristiano Ronaldo and Neymar, earn substantial salaries, but their contracts are often structured differently.
Impact on Future Negotiations
Ohtani’s contract is likely to influence future contract negotiations in MLB and other sports, setting a new benchmark for player compensation.
FAQ About Shohei Ohtani’s Earnings
1. How much is Shohei Ohtani’s annual salary with the Dodgers?
Shohei Ohtani’s annual salary with the Dodgers is $2 million. However, he also has $68 million deferred each year.
2. How much will Shohei Ohtani be paid in total?
Shohei Ohtani will be paid a total of $700 million over the 10-year contract.
3. When will Shohei Ohtani receive his deferred payments?
Shohei Ohtani will receive his deferred payments in $68 million installments between 2034 and 2043.
4. How does Shohei Ohtani’s contract compare to other MLB players?
Shohei Ohtani’s contract is the largest in MLB history, surpassing Mike Trout’s previous record.
5. What is the luxury tax impact of Shohei Ohtani’s contract?
Shohei Ohtani’s contract has a $46 million annual value for luxury tax purposes, thanks to the deferred payments.
6. How much does Shohei Ohtani make from endorsements?
Shohei Ohtani makes an estimated $40 million per year from endorsements.
7. What are some of Shohei Ohtani’s endorsement partners?
Shohei Ohtani’s endorsement partners include BOSS, Fanatics, Kowa, Seiko, and New Balance.
8. Does Shohei Ohtani have a no-trade clause?
Yes, Shohei Ohtani has a full no-trade clause in his contract.
9. Can Shohei Ohtani opt out of his contract?
Shohei Ohtani has a “key man” provision that allows him to opt out if Andrew Friedman or Mark Walter leave the Dodgers.
10. How does Shohei Ohtani manage his finances?
It is likely that Shohei Ohtani employs a team of professional financial advisors to manage his wealth.
Understanding Shohei Ohtani’s financial arrangements provides valuable insights into the world of high-stakes sports contracts and financial planning.
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