Dodgers & MLB Luxury Tax: 2025 Records

Los angeles, December 28, 2025 – The Los Angeles Dodgers are digging deep into their pockets, to the tune of a record $169.4 million, to cover luxury tax penalties for the 2025 Major League Baseball season. This hefty bill underscores the escalating costs of fielding a competitive team in todayS MLB landscape.

Dodgers’ Spending Spree Drives Up Tax Total

Nine teams now face luxury tax payments, matching a record, while the overall tax burden has reached $402.6 million-a significant jump from last year’s $311.3 million.

• The Dodgers’ $169.4 million luxury tax payment is the highest in MLB history.
• Nine teams are paying the luxury tax for the 2025 season, tying a league record.
• The total amount of luxury tax payments for 2025 reached $402.6 million, surpassing the previous high.
• The competitive balance tax (CBT) threshold for 2025 is $241 million, and is set to rise to $244 million in 2026.

The Dodgers’ massive payroll of $417.3 million far exceeded the 2025 competitive balance tax (CBT) threshold of $241 million. Their repeated breaches of the threshold-going over for at least three consecutive seasons-triggered additional surcharges, according to Ronald Blum of the Associated Press.

What constitutes a luxury tax in MLB? The luxury tax is designed to discourage teams from excessive spending on player salaries, with the collected funds redistributed to teams with lower payrolls, aiming to promote competitive balance.

Beyond the Dodgers, eight other teams will also be paying luxury tax fees for the 2025 season: the New York Mets, New York yankees, Philadelphia phillies, toronto Blue Jays, San Diego Padres, Boston Red Sox, Texas Rangers, and Houston Astros.

Did you know? – The luxury tax was first introduced in 1997. It’s been adjusted several times as, with the CBT threshold and tax rates changing to reflect league revenue growth and competitive balance goals.

Interestingly, the Atlanta Braves, San Francisco Giants, and Chicago Cubs managed to stay under the CBT threshold after having made luxury tax payments in 2024, demonstrating a shift in financial strategy for those organizations.

Looking ahead to 2026, the CBT is slated to increase to $244 million. Despite some money coming off the books after the previous season, the Dodgers are projected to remain well over the limit. The recent, record-breaking contract for Edwin Díaz alone adds approximately $21 million back to their 2026 payroll.

A Look Back at the Dodgers’ Luxury Tax History

Prior to the substantial tax bills of the past two seasons, the dodgers’ lowest lux

Pro tip – Teams paying the luxury tax have funds distributed to them by MLB, but only if they have a payroll below a certain level. This incentivizes smaller-market teams to rebuild and stay under the threshold.

The last time the Dodgers operated below the luxury tax threshold was in 2020, when their payroll hovered around $204 million. This marked the end of a three-year stretch where the association avoided any luxury tax payments.

Reader question – Do you think the luxury tax effectively promotes competitive balance in MLB, or does it simply reward teams with deep pockets? Share your thoughts!

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