Shohei Ohtani reportedly will defer 97% of annual salary — and that’s allowed

Shohei Ohtani will reportedly defer about $68 million a year on his record 10-year, $700 million contract with the Los Angeles Dodgers, giving the team much more financial flexibility to comply with Major League Baseball’s luxury tax.

The Athletic reported Monday that Ohtani agreed to defer all but $2 million a year of his annual salary of $70 million, with the deferred amount paid out without interest from 2034 to 2043. Ohtani and the Dodgers finalized the contract Monday night.

According to the Athletic, for the purposes of the luxury tax — known as the competitive balance tax — his annual contract would only amount to $46 million a year.

That bit of creative accounting should give the Dodgers much more flexibility with their payroll, allowing them to keep pursuing expensive superstar players. Besides Ohtani — the two-time American League MVP — the team’s lineup also includes perennial All Stars Mookie Betts (making $365 million over 12 years) and Freddie Freeman ($162 million over six years). Those contracts include deferrals too, though much smaller than Ohtani’s: $155 million deferred for Betts, and $57 million deferred for Freeman. The Dodgers reportedly are also in the hunt to sign Japanese pitcher Yoshinobu Yamamoto, whose contract could hit $300 million.

Also see: Why $700 million for Shohei Ohtani could actually be a good deal for Dodgers

“This is a unique, historic contract for a unique, historic player,” Ohtani’s agent, Nez Balelo said in a statement over the weekend. “[Ohtani] is excited to begin this partnership, and he structured his contract to reflect a true commitment from both sides to long-term success.”

Don’t worry about Ohtani — he makes about $50 million a year off the field through endorsements and other ventures, according to the Athletic.

And while there were howls from opposing fans on social media Monday that the contract unfairly circumvents the luxury tax, it doesn’t break any league rules.

ESPN baseball writer Jeff Passan noted that the current collective-bargaining agreement specifically addresses deferred payments, and puts no restrictions on them. “It’s very clear: Deferred money is limitless — even $680 million of $700 million,” he tweeted.

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