RosterResource - Team Payroll

LUXURY TAX EXPLANATION AND OTHER PAYROLL NOTES

1. The luxury tax thresholds for 2026 are $244M, $264M, $284M, $304M, with increasingly sharp penalties for surpassing each threshold.
2. The average annual value (AAV) of guaranteed contracts is included, not what the player is actually being paid that year. The AAV of contracts with deferrals is lower due to the payout structure and is based on the inflation rate stated in the contract, but unless the exact AAV as calculated by the league is publicly reported, the AAV is calculated as it would be without deferrals.
3. Other payments, such as money to and from other teams, are included. Buyouts of contract options are included in the initial AAV. If a contract option is exercised, the team is credited the value of the buyout on their CBT calculation for the option year.
4. Players no longer on the 40-man roster are included in all cases, regardless of whether they were optioned or released.
5. Salaries for all players on the 40-man roster, even salaries earned while in the minor leagues, are included.
6. Player benefits include health insurance, transportation, meal money, and other non-salary payments for all 40-man roster players.
7. The "estimated salaries for players not yet eligible for arbitration" figure (which is included in luxury tax and "actual" payroll) presumes that, when factoring IL time, each team will need to pay for at least 34 player-seasons over the course of the regular season. This number is calculated by subtracting the number of guaranteed and arbitration-year contracts from 34 (the number of player-seasons) and then multiplying the number that remains (typically around 10-15) by the league minimum salary.
8. The league minimum salary for 2026 is $780k.
9. For a player acquired during the current season, the AAV factored into the luxury tax is based on the amount of time left in the current season at the time of acquisition. AAVs for contracts with multiple years remaining are recalculated; the AAV calculation for the new team is based on the remaining money to be paid (less signing bonuses, always paid by the original first team) divided by the remaining years. If the original team ends up effectively paying less AAV than the original contract called for, they will be credited the difference, prorated over the remaining years of the contract.