Magic’s Luxury Tax Outlook After Paolo Banchero’s $287 Million Contract Extension

The Orlando Magic have one of the more promising young cores in the NBA. Graced with uniquely talented players in their starting rotation, the team has locked in a franchise player for the future by offering Paolo Banchero a massive five-year contract, which could be worth up to $287 million.

Banchero has shown steady improvement with each passing NBA season. Coming off a career year of averaging 25.9 points, 7.5 rebounds, and 4.8 assists, the 22-year-old has shown all the makings of a future superstar in the league.

The contract extension offered to the Magic forward is the first rookie-scale max extension with a player option for the final year, a first since the contract extensions of Luka Doncic and Trae Young in 2021. This only displays the franchise's commitment towards building around its star.

This will be a welcome sight for Magic fans, who have a lot to be excited about after their team's recent offseason moves. But there will be some concerns associated with the Magic's luxury tax situation in the future.

With Banchero's contract extension being finalized, the Magic will have four players who are earning over $30 million once the forward's contract is in effect, with three nearing or exceeding $40 million. 

These are the expected cap hits of the team's core of Paolo Banchero, Franz Wagner, Desmond Bane, and Jalen Suggs for the 2026-27 season:

Franz Wagner - $41.7 million

Paolo Banchero - $41.3 million

Desmond Bane - $39.4 million

Jalen Suggs - $32.4 million

While this poses long-term cap concerns for the Magic, with an estimated $350 million bill in the 2026-27 season, the 2025-26 season seems relatively more friendly.

Orlando has done a great job of retaining some key rotation players on relatively team-friendly salaries. With the re-signing of Moritz Wagner on a one-year, $5 million deal, along with the addition of Tyus Jones, an expiring contract worth $7 million, the Magic have made some good deals.

As things stand, with Banchero's contract only coming into effect in the 2026-27 season, the Magic are in a relatively comfortable cap position. With an estimated luxury tax bill of only $4.3 million, Orlando shouldn't have too much trouble meeting these demands.

The Orlando Magic Have Invested For The Future

The concerns associated with the Magic's luxury tax bill in the summer of 2026 are justified. But these are the risks the franchise is expected to take if it intends to compete for a title.

The core of Banchero, Wagner, and Suggs has proven itself to be solid. The addition of Desmond Bane in the offseason has only added to the team's overall firepower, increasing their chances of making it out of the East.

Given the state of the conference next season, with several teams debilitated and hobbled with injury, the Magic could emerge as clear-cut favorites to advance from the East. 

This investment in the team's core could be significant in revitalizing a title charge, something the franchise hasn't been able to do in a long time. With all the right pieces in place, the Magic will certainly be a team to keep an eye on next season.