The LoHud Yankees Blog

A New York Yankees blog by Chad Jennings and the staff of The Journal News


New Jeter deal will save money toward luxury tax (or maybe not)

Posted by: Chad Jennings - Posted in Misc on Nov 01, 2013 Print This Post Print This Post | Email This Post Email This Post

UPDATE, 2:16 p.m.: Joel Sherman is reporting what seems to make sense based on my limited understanding of the CBA: That Jeter’s contract doesn’t actually save money toward the luxury tax because the average annual value of the previous contract was artificially low to begin with. The player option was dragging it down, and the Yankees have to make up for that. I believe they also have to pay for the buyout, unless the buyout somehow technically never happened. As with all of this luxury tax stuff, it’s awfully confusing.

Derek Jeter’s new $12-million contract will actually save the Yankees some money in their attempt to get below the $189-million luxury tax threshold.

Although his player option would have kicked in at $9.5 million, the average annual value of Jeter’s previous contract was $14.5 million, and that number — not the $9.5 million — would have counted toward the luxury tax. By opting out of that contract and signing for $12 million, Jeter actually got more money but still saved the Yankees $2.5 million in average annual value.

It’s a win-win.

That said, according to one source, saving money toward the luxury tax was not the motivating factor. Jeter and team owner Hal Steinbrenner spoke directly about a new contract. Jeter’s 2014 contract option was a player option, which gave him some leverage. Jeter proposed one figure, Steinbrenner counter with another, and the two sides agreed on the new one-year, $12-million contract.

“At the end of the day, they did a deal,” a source said. “The luxury tax is just a nice benefit.”

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