Financial difficulties may arise for Shohei Ohtani, who is delaying $680 million of his contract for a period of ten years

This week, Shohei Ohtani made history by signing a $700 million, 10-year contract to play for the Los Angeles Dodgers of Major League Baseball. The deal’s unusual payout schedule, though, might come with certain dangers.

Over the course of the 10-year deal, which defers $68 million annually, the Japanese superstar will receive $2 million annually.

Ohtani isn’t the first MLB player to defer income. Players such as Bobby Bonilla and Ken Griffey Jr. also chose yearly payments. In Bonilla’s case, those came with a guaranteed 8% interest rate. But Ohtani will receive the bulk of his contract, $680 million in payments, between 2034 and 2043, without interest.

Ohtani may profit tax-wise from the deal if he leaves California before earning his deferred income, says Betterment’s head of tax, Eric Bronnenkant, a qualified financial advisor.

The highest tax rate in California will rise to 14.4% in 2024, with a 1.1% payroll tax applied to all income. According to Bronnenkant, nonresidents are exempt from paying taxes on «retirement income» provided that the payments are arranged for a minimum of ten years.