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Kershaw’s Texas Home Saves Dodgers Pitcher Millions in Taxes

Jan. 17 (Bloomberg) -- While Clayton Kershaw wears Dodger blue, he’ll keep more green by remaining a Texas resident, according to Robert Raiola, a certified public accountant who specializes in sports and entertainment.

Kershaw, who won the National League Cy Young Award two of the past three seasons, signed a seven-year, $215 million contract with the Los Angeles Dodgers. It’s the richest contract for a pitcher in Major League Baseball history, eclipsing the seven-year, $180 million deal the Detroit Tigers gave pitcher Justin Verlander last offseason.

As a resident of Texas, which has no state income tax, the 25-year-old left-hander will pocket about $1 million more annually than if he lived in California, Raiola said, adding that the state’s 13.3 percent income tax is the highest in the U.S.

The contract includes an $18 million signing bonus, payable immediately, according to a person with direct knowledge of the agreement.

Raiola said his calculations assume that 49 percent of Kershaw’s games will be subjected to California tax. He assumed a state tax rate of 7 percent in other locations where athletes are subject to tax.

Nonresident Taxes

As a Texas resident, Kershaw will pay about $15.5 million in nonresident taxes, Raiola said. As a California resident, he would have paid about $26.2 million over the life of the Dallas native’s agreement, said Raiola, the sports and entertainment senior group manager in the Cranford, New Jersey, office of O’Connor Davies, LLP.

Overall, as a Texas resident, Kershaw will keep about $108.2 million. Had he lived in California, he would have kept about $101.7, a difference of about $6.5 million over the seven years.

The calculations also included a 5 percent agent fee. Kershaw is represented by Casey Close of Excel Sports Management, whose clients include Kershaw’s teammate Zack Greinke and Derek Jeter of the New York Yankees.

To contact the reporter on this story: Scott Soshnick in New York at ssoshnick@bloomberg.net

To contact the editor responsible for this story: Michael Sillup at msillup@bloomberg.net

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