The 2026 Luxury Tax and Why Some Teams Could Wait Until the Last Minute to Get Under It

Here are the current luxury tax projections for 2025-26 and the challenges for particular teams in getting below the tax.

We are less than two weeks away from the trade deadline, and we’re still only at one trade. Despite the inactivity, it doesn’t necessarily mean that it’s due to bad contracts and few tangible assets, resulting in a slower market. That may mean fewer big names moved, but it probably won’t lower the total volume of trades.

In fact, there probably are frameworks already agreed upon, but contingent on other things happening or not happening. Teams might be waiting until the absolute last minute to see ifa top player, like Giannis Antetokounmpo or someone else, emerges as available.

Teams could also be waiting until the last minute to see where their team is before making a big trade. For example, the Warriors’ title chances are effectively over with Jimmy Butler out for the season with a torn ACL. Imagine if the Warriors parted with multiple first-round picks in a move that just would’ve at best put them back in the position they were before the injury.

Then there are the teams above the luxury tax that are expected to get below the $187.9 million luxury tax threshold. As of now, there are 14 teams above it:

If the $452 million tax penalties among all 14 taxpayers stick, the 16 non-taxpayers would receive half that amount distributed evenly, or $14,127,500. It would be the second-highest distribution in NBA history, just $1 million shy of the record set in 2022-23.

However, that amount is not expected to stick. A significant portion of the current taxpayers will get out of the tax entirely. Most of them will probably at least reduce their penalty. For example, the Cavaliers certainly won’t be able to shed $40.7 million midseason. They could perhaps reduce $10 million (aka Lonzo Ball), which would shave $60 million off their tax penalty.

The Warriors are still figuring out what to do, but it seems like they’re unlikely to reduce significant payroll. It will be difficult to do so in a deal involving Butler. If they can’t find a suitable trade for Jonathan Kuminga, they’re unlikely to dump him just to reduce their tax. They seem more likely to hold onto his salary for another opportunity to trade him in the offseason.

The Knicks and Timberwolves are also unlikely to significantly reduce payroll. They’re looking to maximize their payroll to be as competitive as possible. The Lakers and Rockets are unlikely to get out of the tax entirely for similar reasons. The rest of the teams are either locks or strong bets to make a cost-cutting move that gets them under the tax.

A handful of these teams can get below the threshold with a small move. So why don’t they make such trades now? For some of these teams, a trade could get them under the 14-player roster requirement. If they didn’t get under the tax significantly enough, they could get above it again once they backfill their roster.