Shohei Ohtani deferred payments, explained: Why Dodgers contract will withhold $680 million until 2034

News of Shohei Ohtani's record-shattering 10-year, $700 million contract with the Dodgers rocked the baseball world on Saturday, and the news on Monday could count as an aftershock.

Multiple reporters detailed the extreme deferments in Ohtani's mega deal, which will keep the contract as manageable as possible for the Dodgers and backload much of the money beyond the end of the contract.

While the Dodgers are one of baseball's most cash-laden franchises, even they might have had trouble affording a $70 million annual salary with multiple other MVPs already on the books. By deferring much of the contract, Ohtani opened the door for Los Angeles to add more talent while avoiding MLB's harshest luxury tax penalties.

MORE: How rare is the Dodgers' three-MVP lineup?

Here's what you need to know about how much of Ohtani's contract will be deferred.

Shohei Ohtani deferred payments, explained

The Athletic's Fabian Ardaya first reported Monday that Ohtani will defer $68 million of his $70 million annual salary, meaning the two-time MVP will make just $2 million per year for the duration of the contract. Starting in 2034, Ohtani will make $68 million annually.

That is not a typo, but the reality of the deal isn't as simple as it sounds. The contract will still count $46 million annually toward the luxury tax, rather than $2 million, so it is still a significant presence on the books for the Dodgers.

Exclusive @TheAthletic: Shohei Ohtani will defer $68 million per year of his $70 million annual salary over the course of his 10-year, $700 million deal with the Dodgers, allowing the team to keep spending, according to a person briefed on the terms.https://t.co/IsnWlsbTq9

— Fabian Ardaya (@FabianArdaya) December 11, 2023

Ohtani will only be receiving $2 million per year, likely making much of his income through endorsement deals. The contract does count as $46 million toward luxury tax thresholds that have held even the largest-market teams back to a degree in recent years.

USA Today's Bob Nightengale reported that Ohtani wanted significant deferments to ensure the Dodgers still have the flexibility to add talent elsewhere on the roster. 

MLB does not have any limitations as to how much of a contract can be deferred. While deferments are unusual, Bobby Bonilla (Mets) and Max Scherzer (Nationals) are two players famously still being paid for contracts that have already ended.

For anyone wondering if MLB will challenge or cancel Ohtani's contract: The answer is unequivocally no. There is a specific article in the collective-bargaining agreement that addresses this. And it's very clear: Deferred money is limitless -- even $680 million of $700 million. pic.twitter.com/DGNK0JulED

— Jeff Passan (@JeffPassan) December 11, 2023

What the Dodgers do with the additional money remains to be seen. They certainly could use some more starting pitching after entering this past postseason extraordinarily thin in the rotation. Ohtani, meanwhile, will continue to be a very wealthy man well into his 40s.

MORE: What's next for the Dodgers after signing Shohei Ohtani?

Shohei Ohtani contract breakdown

While the contract will still count as $46 million per year toward the luxury tax for the Dodgers, Ohtani will receive only $20 million from the organization through 2034. Here's a breakdown of what Ohtani is set to make through 2043, when deferments end.