Back in April, a report suggested that J.R. Smith was "very, very likely" to opt out of the second year of his two-year contract with the Knicks. Today, Jared Zwerling of ESPNNewYork.com confirms that's indeed the case, reporting that Smith will officially announce his decision to turn down his player option prior to the June 30th deadline. According to Zwerling though, the Sixth Man of the Year is "likely" to re-sign with the Knicks.
Using the Early Bird exception, the Knicks will be eligible to sign Smith to a contract for up to four years, starting at an amount worth 104.5% of the average salary. That exact figure won't be known until July, but it will be in excess of $5MM, so Smith could guarantee himself a total payday in excess of $20MM if he and the Knicks were to agree to a long-term deal.
Even with Jason Kidd no longer in the picture, the Knicks won't have the cap flexibility to sign Smith to amount greater than the Early Bird exception will allow, meaning rival suitors with cap space would be able to outbid the Knicks. Still, Smith has thrived since arriving in New York and appears to love playing (and living) in the Big Apple, so it wouldn't be a huge surprise to see him turn down a larger offer to return to the Knicks.
If Smith had decided to exercise his player option, he'd have earned $2,932,742 in 2013/14 before gaining full Bird rights in the summer of 2014.