Tax-Friendly Tactics: Shohei Ohtani's Strategic Play for Financial Wins with the Dodgers

Dodgers' player Shohei Ohtani and his agent are capitalizing on tax-friendly states, like Florida, where there is no state income tax. Ohtani's tax-savvy strategy involves signing a ten-year, $700 million contract with the Dodgers, taking advantage of states with no income tax, such as Florida, Texas, Nevada, Alaska, South Dakota, and Wyoming.

Your federal tax obligations for deferred compensation remain consistent regardless of your current residence when receiving the funds. However, the impact on state tax liability depends on the payment structure. Generally, the state where the compensation was earned taxes deferred payments, but if you opt for a payout over ten years or more, taxes are applied in your current state of residence during distribution. Moving to a state with no income tax or lower rates can significantly affect your overall tax burden.

This allows him to defer significant tax payments until after the contract ends, creating a win-win situation for Ohtani and the Dodgers, fostering team success, global endorsements, and increased fan support, mirroring Todd's strategy, with a payout of approximately $680 million starting at age 40. By signing a lengthy contract, Ohtani can postpone taxes until after residency changes to a no-income-tax state, potentially saving millions. His annual payment starts at $2 million and escalates post-retirement.

Ohtani's strategic brilliance aims to enable the Dodgers to sign more players, pursue championships, attract international endorsements, especially from Japan, and boost fan engagement through higher ticket prices—a win-win scenario for both Ohtani and the Dodgers. This shows that even the wealthy run from taxes like chickens, just like us regular middle-class folks who not only talk behind people's backs but also struggle with our own taxes.

*Reminder: Apr 15, 2024 Tax Due

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