Luxury tax: Is Cody Bellinger’s signing a poisoned gift?

The New York Yankees had no choice but to bring free agent Cody Bellinger back into their ranks if they wanted to remain competitive in a highly competitive American League East division.

But considering the punitive structure of the luxury tax in the current collective bargaining agreement, the five-year, $162.5 million contract awarded to the star outfielder could prove to be a poisoned gift.

At the start of the offseason, Bombers owner Hal Steinbrenner reportedly wanted to reduce his club's payroll compared to 2025 (approximately $319 million). The goal was to bring it below the third luxury tax threshold, which stands at $304 million.

But that won't be the case, far from it, due in part to Bellinger's return to the Bronx. He will receive annual salaries of approximately $32.5 million in 2026 and 2027, as well as a $20 million signing bonus.

Since a large percentage of the total amount will be paid early in the deal, the impact on the luxury tax will be $48.55 million in 2026. This will push the Yankees above the final luxury tax threshold, and since the club is a repeat offender at this level, New York faces astronomical penalty payments.

Cody Bellinger's luxury tax hit for 2026 will be over $48 million per @Joelsherman1.

As a result, the #Yankees will end up with a Luxury Tax payroll just north of $330 million, the highest they've ever had entering a season. pic.twitter.com/y36LG8CoDb

— Fireside Yankees (@FiresideYankees) January 28, 2026

The current formula is punitive for advance payments, but not for deferred payments over 375 years. We salute the Los Angeles Dodgers, by the way.

We'll see how Steinbrenner and his flock handle this issue, but with these penalties looming, it could derail the Yankees' plans to add depth to their lineup, especially on the right side of the plate, as well as on the mound.

This content was created with the help of AI.