Does Deferred Money Count Against Luxury Tax in MLB

In Major League Baseball, the luxury tax is a complex system that can be tricky to navigate. The luxury tax is a penalty imposed on teams that exceed a certain payroll threshold.

One key aspect of the luxury tax is how it treats deferred money. Deferred money is money that is paid out over time, rather than all at once. This can be a common practice in baseball contracts, where a player may receive a large signing bonus upfront, but the majority of their salary is paid out in future years.

Deferred money can be a significant factor in a team's payroll, but it's not always clear how it counts towards the luxury tax. In fact, according to the Collective Bargaining Agreement, deferred money is only counted against a team's payroll in the year it is earned, not when it is paid out.

This can have a big impact on a team's luxury tax liability, as it can allow them to keep a larger payroll without exceeding the threshold.

The Dodgers have taken deferrals to a new level, with a staggering $1 billion+ in deferred payments to seven players, including Shohei Ohtani, Blake Snell, and Mookie Betts.

Shohei Ohtani's contract has $680 million deferred, lowering the tax value to $46 million annually. This allows the Dodgers to circumvent the luxury tax, saving them significant money in the short term.

The Dodgers have accumulated over $1 billion in deferred payments to seven players between 2028-46, with Ohtani's deal accounting for a significant chunk of that amount. This has allowed the team to build out a star-studded roster.

Mookie Betts' 12-year, $365 million contract includes $115 million in deferrals between 2033-44, which lowers the net present value of the total contract. Betts' contract averages $30.4 million per season nominally, but with the deferrals, it's considered roughly $25.5 million per season toward the CBT.

The Dodgers' payroll for competitive balance tax purposes is estimated to be nearing $290 million, with Freeman on board, plus Tyler Anderson and Danny Duffy. This would put the Dodgers in the fourth and highest tier under the new collective bargaining agreement.

The Dodgers have an uncommon amount of payroll flexibility, with only Freeman, Mookie Betts, and Chris Taylor having guaranteed contracts past 2023. They'll have Walker Buehler and Will Smith likely earning big money in salary arbitration in 2024, and by then they will have a number of choices to make with seven team options after this season.

The Dodgers' use of deferred money has allowed them to circumvent the luxury tax, saving them significant money in the short term. This has enabled them to build a star-studded roster, including Shohei Ohtani's 10-year, $700 million contract, which includes $680 million in deferred payments between 2034-43.

Mookie Betts' 12-year, $365 million contract includes $115 million in deferrals between 2033-44, which lowers the net present value of the total contract. This reduction allows the Dodgers to save money on the competitive balance tax.

The Dodgers' payroll for competitive balance tax purposes is estimated to be nearing $290 million, the fourth and highest tier under the new collective bargaining agreement. This is due in part to the deferred payments made to players like Freddie Freeman and Will Smith.

The Dodgers last year paid $32.65 million in luxury tax on a payroll of $285.6 million, and going over the threshold for a second straight year will increase their rates for going over the various tiers. However, the team has an uncommon amount of payroll flexibility, with only a few players having guaranteed contracts past 2023.

The Dodgers have taken advantage of a loophole in the collective bargaining agreement, deferring nearly $1 billion in salaries on their roster. This includes $680 million of Shohei Ohtani's $700 million contract, which is payable from 2034-43.

The Dodgers' use of deferred money has allowed them to circumvent the luxury tax, saving them significant money in the short term. This is because the value of deferred money is discounted at the federal mid-term rate for the calculation of a team's tax payroll.

The Dodgers' payroll for competitive balance tax purposes is estimated to be nearing $290 million, the fourth and highest tier under the new collective bargaining agreement. This figure counts the full salary for Trevor Bauer, who is currently on administrative leave.

The Dodgers have an uncommon amount of payroll flexibility, with only Freddie Freeman, Mookie Betts, and Chris Taylor having guaranteed contracts past 2023. The team's use of deferred money has allowed them to build out a star-studded roster.

The Dodgers' practice of deferring salaries is not new, but they have taken it to a brand-new level. The team's owner, Andrew Friedman, has stated that the flexibility provided by deferred money has allowed them to stay at the level they have and have a strong future outlook.

The Dodgers' use of deferred money has raised eyebrows, with some calling it a loophole that needs to be closed. The Athletic's Ken Rosenthal has suggested that the present-day value of a contract should count against the luxury tax, not the deferred value.

Other teams, such as the Mets and Red Sox, have also taken advantage of the loophole, but few have done it to the level of the Dodgers. The Dodgers' use of deferred money has been criticized by some, who say it's making a mockery of the sport.