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When Can The New York Yankees Expect To Get Under The Luxury Tax?


The New York Yankees just paid over $28 million dollars in luxury taxes for the 2013 season.  While giving a valiant effort, they will once again pass the maximum salary of $189 million in 2014.  Even if the Yankees do not have to pay Alex Rodriguez for all of 2014 and they do not sign Japanese pitcher Masahiro Tanaka, they will still go out and pay for more pitching if not more.  While we know the Yankees will be responsible for more luxury taxes in 2014, when could they conceivably get under the luxury tax while staying competitive?

The maximum team salary threshold will be $189 million from 2014 – 2016.  Based on the current contracts the Yankees are locked into, the Yankees will still owe just 6 players $122.27 million.  With Alex Rodriguez, Mark Teixeira, CC Sabathia, Jacoby Ellsbury, Brian McCann, and Carlos Beltran occupying 65% of the below luxury tax threshold, it appears 2017 may be the first realistic year the Yankees can avoid the luxury tax.  While we do not know the maximum salary allowed for 2017, we do know that Teixeira, Beltran, and possibly Sabathia come off the books.  Sabathia has a vesting option that kicks in if Sabathia spends fewer than 45 days on the disabled list in 2016.  There is a $5 million dollar buyout if the contract does not vest.

The Yankees wanted to get under the cap for the 2014 season because the luxury tax resets every time a team is under it.  Right now, the Yankees are paying 50% for every dollar the team is over the cap.  With a 2014 reset, they would only pay 17.5% tax the next time they go over it, 30% for the second year in a row, 40% for the third year in a row, and 50% per year for every year afterwards.  So getting under the tax is a move that will literally save the team tens of millions of dollars.

It stands to reason that the Yankees could get under the luxury cap as soon as 2015, but it is highly doubtful.  Huroki Kuroda and Derek Jeter are the big names coming off the books, but Kuroda’s salary will be replaced with another starting pitcher, and Jeter may come back again.  On the plus side, getting under the luxury tax is a wish, not a need for the Yankees.  The only need for the team is the mandate to have a competitive team year after year.  The 2013 season was seen as a down year for the team, and it still took 157 games to knock the Yankees out of playoff contention.  The Yankees may be paying millions in luxury tax in 2014, but they are back in position to take the AL East from their biggest foes.

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Tags: Luxury Tax New York Yankees

  • Ryan

    Good insight. Any idea what the projected salary of players will be this year?

    • Scott Alfano

      It has been reported that the current team salary right now (without Alex Rodriguez) is $178M. So the team has $11M to spend – a figure that will be broken if Tanaka is posted and comes to the Yankees OR Rodriguez plays at least half the season. Needless to say, they will make additional moves during the season as well. Thanks for the question.