Luxury Tax
| $187,895,000 |
Tax Salary Calculation
Date of Calculation
Tax Salary is determined as of the start of the Team’s last Regular Season game, subject to a couple of minor adjustments made after the Regular Season.
Included in Tax Salary
Below are the items included in Tax Salary:
- Total Salaries for the Team (subject to the following adjustments);
- Unlikely Bonuses actually earned;
- Trade Bonuses that (i) are included in Team’s Team Salary (ii) if the Trade is made after the Regular Season (if Trade made during Regular Season, it would already be included in Team Salary so adjustment would not have to be made after Regular Season);
- Grievances/Settlements paid and counted toward Team Salary after the Regular Season;
- 0 to 1 Years of Service Contracts Signed.
Excluded in Tax Salary
Exclude the following from Tax Salary:
- Likely Bonuses that were not earned;
- 50% of Compensation for a League’s suspension of a Player (not a Team suspension).
In Total Salaries, you exclude 50% of the amount reduced in Compensation as a result of suspension by the League or the Team. Tax Salary only excludes the reduction for a suspension by the League.
In 2024-25, Bobby Portis was suspended 25 games for violation of the anti-drug policy. Portis’s Salary that Season was $12,578,296. His suspension cost him $2.85 million (1/110 of his Salary multiplied by 25). The Bucks Tax Salary was reduced by 50% of this amount: $1,429,351.
Tax Penalties
Tax Threshold
The Tax Threshold always equals 121.5% of the Salary Cap. For 2025-26 it is $187,895,000.
For a breakdown of all Thresholds, click here.
Initial Penalties
If at the end of the Regular Season, the Team’s Tax Salary exceeds the Tax Threshold, then the Team must pay a tax penalty.
Repeater Penalties
If the Team was a Taxpayer in 3 of the 4 immediately preceding Seasons, then the Team is deemed a Repeater and must pay the Repeater tax rate.
Tax Rates
Tax Bracket Increase
Each Tax Bracket level below increases in line with the Salary Cap each Season (starting at $5 million in 2023-24).
The Tax Brackets for 2025-26 are $5,585,000.
Note that the first Tax Bracket starts once Tax Salary exceeds the Tax Threshold.
Tax Rates
Below are the Tax Rates for both Non-Repeater and Repeater Taxpayers.
| Tax Bracket | Non-Repeater Tax Rates | Repeater Tax Rates |
|---|---|---|
| $0 – 100% of Tax Bracket Amount | $1.00 | $3.00 |
| 100% – 200% of Tax Bracket Amount | $1.25 | $3.25 |
| 200% – 300% of Tax Bracket Amount | $3.50 | $5.50 |
| 300% – 400% of Tax Bracket Amount | $4.75 | $6.75 |
| 400% of Tax Bracket Amount and Over | Tax rates increase by $0.50 for each additional Tax Bracket. | Tax rates increase by $0.50 for each additional Tax Bracket. |
Tax Brackets
For 2025-26, below are the Tax Brackets based on the Tax Threshold of $187,895,000 and Bracket Amounts of $5,685,000.
The Tax Liability is how much a Team must pay if they exceed the entire Tax Bracket.
For example, if a Team’s Tax Salary is $204,950,000, then they pay the liability for each of the first three Tax Brackets, totaling $32,688,750.
| # | Tax Salary | Non-Repeater Rate | Non-Repeater Tax Liability | Repeater Rate | Repeater Tax Liability |
|---|---|---|---|---|---|
| 1 |
$187,895,001 – $193,580,000 |
$1.00 | $5,685,000 | $3.00 | $17,055,000 |
| 2 |
$193,580,001 – $199,265,000 |
$1.25 | $7,106,250 | $3.25 | $18,476,250 |
| 3 |
$199,265,001 – $204,950,000 |
$3.50 | $19,897,500 | $5.50 | $31,267,500 |
| 4 |
$204,950,001 – $210,635,000 |
$4.75 | $27,003,750 | $6.75 | $38,373,750 |
| 5 |
$210,635,001 – $216,320,000 |
$5.25 | $29,846,250 | $7.25 | $41,216,250 |
| 6 |
$216,320,001 – $222,005,000 |
$5.75 | $32,688,750 | $7.75 | $44,058,750 |
| 7 |
$222,005,001 – $227,690,000 |
$6.25 | $35,531,250 | $8.25 | $46,901,250 |
Calculating Tax Liability
Take the following steps to find the Team’s Tax Liability:
Step 1 – Determine which Tax Bracket the Team’s Tax Salary Falls
First, determine which bracket the Team’s Tax Salary lands, which we’ll call the “Final Bracket.” All brackets falling before the Final Bracket are called the “Prior Brackets.”
As a hypothetical, let’s assume that Team A is a Non-Repeater Tax Team with Tax Salary totaling $218,000,000. Looking at the chart above, the Team’s Final Bracket is Bracket 6. Then, Brackets 1 through 5 are the Prior Brackets.
Step 2 – Include all Tax Liability for Prior Brackets
Add the total Tax Liability found in all Prior Brackets.
For the hypothetical, since Team A’s Final Bracket is Bracket 6, Team A would include all of the Tax Liability in Brackets 1 through 5.The total amount for Brackets 1 through 5 is $89,538,750.
Step 3 – Determine How Much Tax Salary is in the Final Tax Bracket
Find out how much Tax Salary remains in the Final Bracket. To find this, you subtract the threshold from the last Prior Bracket from the Tax Salary.
In our hypothetical. You subtract $218,000,000 (Tax Salary) by $216,320,000 (Bracket 5 threshold). This equals $1,680,000. This means there is $1,680,000 in remaining Tax Salary in the Final Bracket.
Step 4 – Multiply Remaining Amount by the Tax Rate in Final Bracket
Multiply that remaining amount in the Final Bracket by its applicable Tax Rate.
In our hypothetical, multiply $1,680,000 by $5.75 (tax rate for Final Bracket, i.e. Bracket 6). This totals $9,660,000.
Step 5 – Add Tax Liability from Final Bracket to the Prior Brackets for Total Tax Liability
Take the amount from Step 4 and add it to Step 2 and find the total Tax Liability for the Team.
In our hypothetical, add $89,538,750 (Prior Brackets Tax Liability) to $9,660,000 (Final Bracket Tax Liability) to find the Total Tax Liability of $99,198,750.
Tax Payments
The tax penalties are paid to the NBA, and they become the exclusive property of the NBA.
The NBA may elect to distribute 50% of the tax penalties to the Teams that did not owe a tax (other than a Team that didn’t satisfy the Minimum Team Salary Threshold).
The other 50% (or more if not distributed to the NBA Teams) shall be used for “League Purposes,” which may include distributing it to the Teams.
Per Sports Business Classroom, there were 10 Tax Teams in 2024-25 with $461.2 million in tax penalties. Half of this was distributed to the 20 Non-Tax Teams at $11.5 million each, while the rest was withheld to fund reveune sharing.