Key Takeaways For The Canadiens

The Montreal Canadiens have locked up one of its brightest young stars, inking 21-year-old defenseman Lane Hutson to an eight-year, $70.8 million contract extension, which carries an average annual value (AAV) of $8.85 million. While that’s a lot of money for a player with just one full season under his hockey belt, the deal looks like yet another
shrewd move by Canadiens GM Kent Hughes.

Here are your key takeaways:

A Hometown Discount

Agreed – $70 million is a lot of money. Still, Hutson’s deal represents a hometown discount. If Hutson had chosen to play hardball and waited another year, his AAV would almost certainly have exceeded $9 million.

Just look at recent comparables signed over the past 3 months:

1. Brock Faber: 8 years, $68 million — $8.5M AAV
2. Luke Hughes: 7 years, $63 million — $9M AAV
3. Jackson LaCombe: 8 years, $72 million — $9M AAV

Each of these players brings something unique to the table. LaCombe is a reliable two-way presence (43 points in 75 games), Hughes is a smooth-skating offensive threat (44 points in 71 games) and Faber is a two-way, defensive-minded defenseman, valued for his shutdown abilities (29 points in 82 games).

As a rookie, Hutson outscored them all, and did so by at least 20 points. He also recorded the most assists by a rookie defenseman in a season among active NHLers, a list that includes names like Cale Makar, Quinn Hughes, his brother Luke, Moritz Seider, and Faber. Hutson’s elite agility, puck skills, and offensive instincts make him a true unicorn among young NHL defensemen.

Put simply: if Hughes and Lacombe got $9 million, Hutson could have demanded at least that and probably something closer to $9.25 million.

Taxes Matter: Signing Bonuses Galore

Taxes matter. Players have finite careers with finite earning potential. That means they have to maximize their salaries.

Here, $55 million – or 78% – of Hutson’s contract is by way of bonuses. This is important.

Here’s why.

The Canadian tax on signing bonuses for non-residents of Canada is limited to 15%, with the player then paying the balance owing at the prevailing tax rate in his home state in the United States. So while a player who claims to be a resident of a U.S. state pays taxes in both Canada and the U.S., the combined tax savings is significant, potentially saving the player millions of dollars over the term of the contract.

So to minimize the tax burden, some players on Canadian teams structure their contracts primarily by way of signing bonuses knowing those bonuses will only be taxed at 15% in Canada. That’s why you sometimes see a player sign a deal with the CBA base salary of $775,000 and the other $10 million in signing bonuses. Taxes, taxes, taxes.

Assuming Hutson claims residency in the state of Michigan, he stands to save about $6.5 million in taxes over the term of his deal.

And there’s more: had Hutson signed this same deal next year, his tax savings would have dropped to $4.9 million since the new CBA limits bonuses to 60% of a contract.

By acting now, Hutson saved nearly $1.5 million in taxes.

Cap Flexibility

With the salary cap going up to $104 million next season, Hutson’s cap hit will represent a very reasonable 8.51% of the salary cap. That fits in nicely with the core of the team:

1. Noah Dobson (2033) – 9.1%
2. Lane Hutson (2034) – 8.51%
3. Cole Caufield (2031) – 7.6%
4. Nick Suzuki (2030) – 7.6%
5. Juraj Slafkovsky (2033) – 7.3%
6. Kaiden Guhle (2031) – 5.3%

The Canadiens have made a habit of signing players to reasonable cap hits and the Hutson deal is no exception.

Long-Term Value Outlook

With the salary cap expected to rise, Hutson’s deal will look very good in the years to come. In just three years, and adjusted for inflation, Hutson’s $8.85M cap hit will be equivalent to about $7 million. That is strong value for a potential elite defenseman entering his prime.

The Bottom Line

This contract represents another savvy signing by a Montreal Canadiens’ team on the rise. The team secured a foundational piece of its blue line for years to come, while maintaining cap flexibility.

This contract is a win for the Canadiens, a win for Hutson, and most importantly, a win for Habs fan.