Indiana Pacers Currently In Rare Position As Team Salary Sits Over Luxury Tax Line

PARIS, FRANCE - JANUARY 23: Sandro Mamukelashvili of San Antonio Spurs slam dunks in the NBA game between San Antonio Spurs and the Indiana Pacers at The Accor Arena on January 25, 2025 in Paris, France. (Photo by Dean Mouhtaropoulos/Getty Images)

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The Indiana Pacers currently sit somewhere that they are rarely found: over the luxury tax.

In fact, the Pacers haven’t been a tax paying team since the 2004-05 season. In the two decades since, the franchise has always finished with a team salary below the luxury tax line and received a distribution of money from the league’s taxpaying teams.

Since 2005, the only NBA teams to never cross the luxury tax threshold are the Pacers, Memphis Grizzlies, Detroit Pistons, Charlotte Hornets, and Sacramento Kings. Reporting suggested that the Pacers may have been willing to do so in the 2025-26 season after their run to the NBA Finals, but Tyrese Haliburton’s injury changed everything before Myles Turner left in free agency.

Since 2001-02, the Pacers have finished a season above the luxury tax barrier three times. Yet right now, they are in a position where if no money saving moves are made between now and the last day of the league year, that streak would end at the conclusion of the 2026-27 season.

In the offseason, Indiana added Kelly Oubre and Larry Nance in free agency while holding on to guard Quenton Jackson. Those moves added salary to their books, and the only money that went out the door came from a waiver of center Micah Potter. In all, the Pacers got more expensive in the summer.

That makes sense – they’re trying to win at a high level this year. But those transactions, in tandem, have the Pacers total team salary at just about $206.3 million right now. The luxury tax line for the 2026-27 NBA season is $200.428 million, so Indiana is currently over the tax with 14 players signed to standard contracts.

What could change about the Pacers luxury tax spending level?

That does not mean they will be a tax paying team when the season ends. Luxury tax payments are calculated at the end of a league year, so if the Pacers can shed money in trades during the season they could still get under the tax. Their level of success during the season will certainly be a factor in any financially-focused moves, as will be for other transactional opportunities.

LAS VEGAS, NEVADA - JULY 09: (L-R) General manager Kevin Pritchard, Victor Oladipo #4 and head coach Nate McMillan of the Indiana Pacers look on during the game between the Atlanta Hawks and the Indiana Pacers during the 2019 NBA Summer League at the Thomas & Mack Center on July 09, 2019 in Las Vegas, Nevada. (Photo by Michael Reaves/Getty Images)

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In the past, the Pacers have made smaller moves to give themselves breathing room under the tax line. In 2025, a season that ended with a run to the NBA Finals, they traded away injured center James Wiseman in a move that both freed up a roster spot and opened up some spending power beneath the luxury tax.

After acquiring Pascal Siakam in a trade in early 2024, the Pacers were staring at an expensive team for the 2024-25 season. In between acquiring Siakam and the end of the following year, they traded away Buddy Hield for Doug McDermott (then McDermott signed elsewhere) and lost Jalen Smith in free agency. Those moves also helped the team have some flexibility under the tax.

Could 2026-27 be different? The Pacers are entering the season with Haliburton healthy. He was the star that guided their 2025 postseason run that nearly ended with a championship. Going all in on a player that talented requires a spending commitment.

General manager Chad Buchanan touched on that during an appearance on the Setting The Pace podcast earlier in the offseason. “Our ownership has made the commitment that this team is right there on the doorstep of competing for a championship and gave us the green light that, hey, if we’re ever in position to be in that spot, that if it takes going into the tax to add to the team, then let’s do it,” Buchanan said of the Pacers possibly paying the luxury tax. “And we're very fortunate that ownership has made that commitment.”

Right now, the Pacers are about $5.9 million over the luxury tax line. For every dollar spent over the tax up to $6 million over, a team’s luxury tax bill is one additional dollar for every dollar spent. So right now, the Pacers tax payment for the coming season would be that $5.9 million number. But it could change throughout the season if trades are made – those penalties are designed to be stronger the farther a team is over the tax line.

If the Pacers do try to get under the tax during the coming season, the mid-sized contracts of players like Oubre, Ben Sheppard, Jarace Walker, and perhaps even Jay Huff will be worth keeping an eye on. If any of those players are out of the team’s rotation entirely, moving them for cheaper alternatives could make sense for the front office.

Given the Pacers history as a franchise that doesn’t pay the luxury tax, their spending situation will be worth monitoring all year. But the team’s roster is as good as it’s ever been, proven by reaching the Finals for just the second time in franchise history two seasons ago. That first time that happened was in 2000, and the Pacers – who still have the same majority owner in Herb Simon – were a taxpaying team three times in the next five seasons after that playoff run. Success plays a major part in these decisions, and it will for the Pacers this year.

This article was originally published on Forbes.com

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