Hoops Rumors Glossary: Hard Cap

The NBA’s salary cap is a “soft” cap, which is why most teams’ salaries have surpassed the $136,021,000 threshold for the 2023/24 season. Once a team uses up all of its cap room, it can use a series of “exceptions” – including the mid-level, bi-annual, and various forms of Bird rights – to exceed the cap.

Since the NBA’s Collective Bargaining Agreement doesn’t feature a “hard” cap by default, teams can construct rosters that not only exceed the cap but also blow past the luxury tax line ($165,294,000 in ’23/24). While it would be nearly impossible in practical terms, there’s technically no rule restricting a club from having a team salary worth double or triple the salary cap.

However, there are certain scenarios in 2023/24 in which a team can become hard-capped at one of two thresholds, known as the “tax aprons.” Those scenarios are as follows:

A team becomes hard-capped at the first tax apron if:

1. The team uses its bi-annual exception to sign a player.
2. The team uses more than the taxpayer portion of the mid-level exception to sign a player (or multiple players).
   • Note: In 2023/24, the taxpayer MLE is worth $5,000,000, compared to $12,405,000 for the full non-taxpayer MLE. The taxpayer MLE can be used to complete deals up to two years, while the non-taxpayer MLE can be used to complete deals up to four years.
     
3. The team acquires a player via sign-and-trade.
4. The team signs a player who was waived during the current season, if his pre-waiver salary for 2023/24 exceeded the amount of the non-taxpayer mid-level exception ($12,405,000).
5. The team takes back more than 110% of the salary it sends out in a trade (using salary-matching rather than cap room).

A team making any of those five roster moves must ensure that its team salary is below the first tax apron when it finalizes the transaction and remains below the apron for the rest of the league year.

For the 2023/24 league year, the first apron is set at $172,346,000, which is $7,052,000 above the tax line. A team that completes one of the five moves listed above can’t surpass that line under any circumstances.

A team becomes hard-capped at the second tax apron if:

1. The team uses any portion of the mid-level exception.

Under the previous Collective Bargaining Agreement, every team was permitted to use at least some portion of the mid-level exception, but it’s no longer available to teams above the second tax apron, so a club that uses any part of the MLE is hard-capped at that second apron.

As noted above, a team that uses more than the taxpayer portion ($5MM) is hard-capped at the first apron, which means teams between the first and second apron are allowed to spend up to $5MM in MLE money.

For the 2023/24 league year, the second apron is set at $182,794,000, which is $17.5MM above the tax line.

So far in ’23/24, a total of 11 teams have hard-capped themselves at the first tax apron by acquiring a player via sign-and-trade, using the non-taxpayer mid-level exception, using the bi-annual exception, or taking back more than 110% of the outgoing salary in a trade. Two more teams have hard-capped themselves at the second apron by using $5MM in mid-level money.

For many of those teams, the restriction is barely noticeable — they remain far below their hard cap and haven’t had to worry about whether a roster move might put them over it. However, a handful of clubs will have to be wary of that hard cap as they approach the trade deadline.

It’s worth noting that even if a team starts a new league year above the tax apron, that doesn’t mean they can’t become hard-capped at some point later in the season. For example, the Warriors are currently well above the second apron, but in the unlikely event that they dump a couple big contracts and then use $5MM of their mid-level exception to sign a free agent, a hard cap would be imposed and they’d be ineligible to surpass the $182.8MM second apron for the rest of the league year.

In other words, the hard cap applies from the moment a team completes one of the transactions listed above, but isn’t applied retroactively.

The list of roster moves that will impose a hard cap on a team will expand beginning in the 2024 offseason. After the last day of the 2023/24 regular season, the following restrictions will apply:

A team becomes hard-capped at the first tax apron if:

1. The team takes back more than 100% of the salary it sends out in a trade (when over the cap).
   • Note: This will replace the fifth rule listed above, reducing the salary-matching limit from 110% to 100% for teams over the first apron.
2. The team uses a traded player exception generated during the prior year (ie. between the end of the previous regular season and the end of the most recent regular season).

A team becomes hard-capped at the second tax apron if:

1. The team aggregates two or more player salaries in a trade.
2. The team sends out cash as part of a trade.
3. The team acquires a player using a traded player exception if that TPE was created by sending out a player via sign-and-trade.

Typically, a team’s hard cap expires on June 30 when the current league year comes to an end, with the team getting a clean slate on July 1. However, beginning in the 2024 offseason, if a team engages in any of the trade-related transactions prohibited for first or second apron teams between the end of the regular season and June 30, the team will not be permitted to exceed that apron level during the following season.

If, for example, a team sends out cash in a trade in June of 2024, that team won’t be allowed to exceed the second tax apron during the 2024/25 league year. The inverse is also true — a team whose 2024/25 salary projects to be over the second apron won’t be able to trade cash in June.

This rule only applies to trade-related transactions because the ones related to free agency don’t come into effect between the end of the regular season and the start of the next league year.

Note: This is a Hoops Rumors Glossary entry. Our glossary posts will explain specific rules relating to trades, free agency, or other aspects of the NBA’s Collective Bargaining Agreement. Larry Coon’s Salary Cap FAQ was used in the creation of this post.

Previous versions of this post was published in 2020 and 2021.