The NBA made the jobs of general managers significantly more difficult after introducing the new collective bargaining agreement. The consequences for teams in the luxury tax are greater than ever before. The majority of the league has ensured they are safe from the penalty, with the two teams likely to appear in the 2025 NBA Finals headlining the list.
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For the casual basketball fan, the term “luxury tax” may sound like something from a business management course. The truth is, the luxury tax has always played a vital role in how NBA teams orchestrate their rosters.
Unlike a league such as the MLB, the NBA has a salary cap. In short, that means each team has the same amount of money to spend on player contracts. The league is designed to reward those who stay under the salary cap threshold and punish those who don’t.
The luxury tax is a penalty line for teams that exceed the salary cap’s payroll. For each dollar a team spends over the cap, they must pay the NBA $1.75. That fee increases to $2.50 if a team is $10–15 million over the cap, and to $3.25 for those $15–20 million above the tax line.
The next question is: how do teams that stay under the salary cap benefit from following the guidelines? The answer is simple. The NBA takes the money paid by teams in the luxury tax and evenly distributes it to teams under the cap.
As a result, 19 teams will benefit financially from their ability to meet the financial restrictions. Here’s a look at those teams.
| Team: | Team Salary: | Space From Salary Cap Limit: | Team Record: |
| Atlanta Hawks | $168,381,401 | $2,432,599 | 40-42 |
| Brooklyn Nets | $169,935,268 | $878,732 | 26-56 |
| Charlotte Hornets | $167,307,747 | $3,506,253 | 19-63 |
| Chicago Bulls | $165,919,354 | $4,894,646 | 39-43 |
| Cleveland Cavaliers | $170,043,589 | $770,411 | 64-18 |
| Detroit Pistons | $141,630,059 | $29,183,941 | 44-38 |
| Houston Rockets | $168,193,566 | $2,620,434 | 52-30 |
| Indiana Pacers | $169,149,491 | $1,664,509 | 50-32 |
| Los Angeles Clippers | $170,720,454 | $93,546 | 50-32 |
| Memphis Grizzlies | $163,865,149 | $6,948,851 | 48-34 |
| Oklahoma City Thunder | $165,601,091 | $5,212,909 | 68-14 |
| Orlando Magic | $150,359,238 | $20,454,762 | 41-41 |
| Philadelphia 76ers | $170,446,816 | $367,184 | 24-58 |
| Portland Trail Blazers | $167,086,613 | $3,727,387 | 36-46 |
| Sacramento Kings | $168,843,977 | $1,970,023 | 40-42 |
| San Antonio Spurs | $162,286,380 | $8,527,620 | 34-48 |
| Toronto Raptors | $170,734,397 | $79,603 | 30-52 |
| Utah Jazz | $154,314,022 | $16,499,978 | 17-65 |
| Washington Wizards | $169,656,756 | $1,157,244 | 18-64 |
Out of all the teams under the salary cap, the most intriguing are the Oklahoma City Thunder and the Indiana Pacers. OKC has already secured its spot in the 2025 NBA Finals, while the Pacers are on the brink of punching their ticket.
These franchises’ ability to build strong rosters without breaking the bank may become the new standard moving forward. Teams like the Phoenix Suns have shown that spending a ridiculous amount of money on star power doesn’t necessarily translate to success.
The Thunder and Pacers have excelled in areas like scouting, drafting, and making timely trades. The Pacers need just one more win over the New York Knicks to lock in a matchup with the Thunder for the NBA championship.
Regardless of how the season ends, both teams’ ability to stay under the luxury tax line sets them up well to run it back with the same core next season.
