Hoops Rumors Glossary

The term “base year compensation” no longer shows up in the NBA’s Collective Bargaining Agreement and hasn’t since 2011. A relic of past agreements, the base year compensation rule was intended to prevent teams from signing free agents to new contracts that were specifically intended to facilitate salary-matching in trades.

While the base year compensation rules have, for the most part, been adjusted and/or removed from the CBA, there’s still one situation where they apply. Teams have to take them into account when completing sign-and-trade deals.

The BYC rules apply to a player who meets all of the following criteria in a sign-and-trade:

• He is a Bird or Early Bird free agent.
• His new salary is worth more than the minimum.
• He receives a raise greater than 20%.
• His team is at or above the cap immediately after the signing.

If the player meets those criteria and is included in a sign-and-trade deal, his outgoing salary for matching purposes is considered to be his previous salary or 50% of his new salary, whichever is greater. For the team he is being signed-and-traded to, his incoming figure for matching purposes is simply his new full salary.

Here are a couple specific examples to help make things a little clearer:

Let’s say the Warriors want to sign-and-trade Jonathan Kuminga this offseason. The likely salary gap between his current contract and his next one make him a good example of a base year compensation player. Kuminga is a Bird free agent, his new salary will be well above the minimum, and Golden State is an over-the-cap team. Having made $7,636,307 in 2024/25, Kuminga figures to receive a raise significantly higher than 20% — there’s a reasonable chance his next deal will start above $20MM. So he’ll meet the BYC criteria.

In a scenario where he signs a deal with a $25MM starting salary as part of a sign-and-trade, Kuminga’s salary for matching purposes from the Warriors’ perspective would be $12.5MM, which is 50% of his new salary (that amount is greater than his previous salary). From his new team’s perspective, Kuminga’s incoming figure would be his actual salary, $25MM.

On the other hand, if Kuminga were to get a starting salary worth $15MM from a new team, his outgoing salary for matching purposes would be $7,636,307, the amount he made in 2024/25, because that figure would be higher than 50% of his new salary ($7.5MM).

Often, a team acquiring a player via sign-and-trade doesn’t have the cap room to sign the player outright, or else there would be little incentive to negotiate a sign-and-trade. That means salary-matching is required, which can be complicated by base year compensation rules.

In the first Kuminga scenario outlined above, where his first-year salary is $25MM, the Warriors wouldn’t be able to take back more than $21,027,000 in salary in exchange for the forward due to the league’s matching rules. That’s calculated by accounting for 50% of Kuminga’s new salary ($12.5MM), plus the expanded traded player exception buffer amount ($8,527,000) for this season.

That maximum incoming number would dip to $12.5MM if the Warriors’ team salary is above the first tax apron or if they want to retain the ability to operate above the first apron later in the season, since taking back a dollar more than 100% of that $12.5MM figure would mean using the expanded traded player exception and would hard-cap them at the first apron for the rest of 2025/26.

However, in order to take on $25MM in incoming salary, Golden State’s hypothetical trade partner – assuming they’re also over the cap – would have to send out at least $16,473,000 in order to account for the league’s salary-matching rules themselves.

In other words, the gap that the base year compensation rules create between the salary-matching figures from the two teams’ perspectives could complicate sign-and-trade talks, requiring the two clubs to include additional pieces or get a third team involved to make the numbers work.

Four players have been signed-and-traded so far this offseason, but only one – Nickeil Alexander-Walker – met all of the base year compensation criteria. He was a Bird free agent earning more than the minimum whose team was over the cap, and he got a substantial raise in the sign-and-trade deal sending him from Minnesota to Atlanta, from $4,312,500 to $15,161,800.

Because the Hawks were able to acquire Alexander-Walker using a sizable traded player exception, the base year compensation rules didn’t really complicate those trade talks, since no salary-matching was required. But it’s worth noting that because of those BYC rules, the new trade exception the Timberwolves created in the move isn’t worth Alexander-Walker’s $15,161,800 salary — it’s worth 50% of that amount, $7,580,900.

The base year compensation rules are designed to prevent teams from circumventing the cap by giving a free agent an inflated single-year salary in a sign-and-trade solely for matching purposes.

The base year compensation concept doesn’t surface all that often, due to the specific criteria that must be met. However, it looms large over sign-and-trade attempts involving free agents who receive significant raises, reducing the likelihood of teams finding a deal that can be legally completed.

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 were published in past years.

After the NBA’s biggest-name free agents come off the board, many teams shift their focus to filling out their training camp rosters. Teams can only carry 15 players on NBA contracts (plus three on two-way deals) during the regular season, but their maximum roster size increases to 21 players in the offseason, allowing clubs to bring a few extra players to camp to audition for a place on the regular season roster or a spot on the team’s G League affiliate.

Many of those players will sign a contract with an Exhibit 10 clause. Introduced in the NBA’s 2017 Collective Bargaining Agreement, Exhibit 10 contracts are one-year deals worth the minimum salary. They don’t come with any compensation protection, but can include an optional bonus worth as little as $5K and – in 2025/26 – as much as $85,300.

Let’s say an undrafted rookie signs an Exhibit 10 contract with the Sixers that includes a $85,300 bonus. He attends camp with the Sixers, but is waived before the regular season begins, with Philadelphia designating him an affiliate player in order to retain his G League rights. In that scenario, if the rookie elects to play in the G League for the Delaware Blue Coats and remains with the club for 60 days, he’d be entitled to his full $85,300 bonus.

The player wouldn’t receive that bonus if he opts to sign with a team overseas after being waived by the Sixers. Essentially, the Exhibit 10 bonus serves as an incentive for players to stick with their team’s G League affiliate — they must spend at least 60 days with the NBAGL club in order to get their bonus.

There’s another scenario in which that undrafted rookie who signs an Exhibit 10 deal with the Sixers would receive his $85,300. Exhibit 10 contracts can be converted into two-way contracts before the regular season begins, so if Philadelphia opted to do that, the $85,300 bonus would turn into a salary guarantee for the player. As soon as his contract becomes a two-way deal, he’s entitled to that bonus, even if the 76ers were to waive him a week later.

The maximum Exhibit 10 bonus will increase in future seasons at the same rate as the NBA salary cap. It began at $75,000 in 2023/24, and because the cap has risen since then by about 13.7%, the maximum Exhibit 10 bonus has increased by the same percentage, from $75,000 to $85,300.

The latest cap projection for 2026/27 is calling for a 7% increase. In that scenario, the maximum Exhibit 10 bonus would rise by another 7% too and would be worth $91,200.

Only teams with a G League affiliate can include an Exhibit 10 bonus in a contract, but that’s no longer an issue now that all 30 NBA clubs have an NBAGL affiliate of their own.

Exhibit 10 contracts don’t count against a team’s salary cap during the offseason. However, they would begin to count against the cap if a team decides to keep a player on an Exhibit 10 contract into the regular season, essentially converting his deal to a standard one-year, minimum-salary deal.

Although they’re not technically required to, virtually every Exhibit 10 contract also contains an Exhibit 9 clause, which provides a team protections when a player on a non-guaranteed training camp contract suffers an injury. If a team wants to sign a player to a deal that includes both an Exhibit 9 and Exhibit 10 clause, it must already be carrying at least 14 players on standard contracts.

Here are a few more notes relating to Exhibit 10 contracts:

• A team can’t carry more than six Exhibit 10 contracts at a time.
• An Exhibit 10 contract can only be converted to a two-way deal before the regular season begins. The deadline is the day before the regular season opener.
• An Exhibit 10 contract that gets converted to a two-way deal can subsequently be converted into a standard NBA contract.
• An Exhibit 10 bonus earned by a player who ends up in the G League or on a two-way contract isn’t counted toward the NBA team’s total salary.

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.

Earlier versions of this post were published in 2018, 2019, and 2023.

Players eligible for restricted free agency don’t become restricted free agents by default. In order to make a player a restricted free agent, a team must extend a qualifying offer to him — a player who doesn’t receive one becomes an unrestricted free agent instead.

The qualifying offer, which is essentially just a one-year contract offer, varies in amount depending on a player’s service time and previous contract status.

If a player reaches free agency with three or fewer years of NBA service time under his belt, his qualifying offer is worth whichever of the following amounts is greater:

• 135% of his prior salary; or 125% of his prior salary, if he signed his contract before the 2023/24 league year.
• His minimum salary, plus $200K.

For instance, after earning $2,019,699 this season, Trail Blazers forward Jabari Walker will be eligible for a qualifying offer this season if Portland wants to make him a restricted free agent. What would that qualifying offer be worth?

Well, 135% of Walker’s prior salary would be $2,726,594, but he signed his contract in July 2022, which means the relevant calculation here would be 125% of his prior salary. That works out to $2,524,624. Walker projects to have a minimum salary worth $2,378,870 in 2025/26. Adding $200K to that figure gets us to $2,578,870.

Walker’s qualifying offer would be worth the greater amount of those two: $2,578,870.

Walker’s minimum-salary projection is based on an estimated 10% salary cap increase. If the cap were to only increase by 5% next season, his projected minimum salary would be just $2,270,736. Adding $200K to that figure would work out to $2,470,736, so in that scenario, 125% of his prior salary would actually be the larger amount of the two and would be his qualifying offer.

It’s not a certainty yet that the cap will increase by the maximum 10%, so Walker’s qualifying offer projection is tentative for now. But as long as the cap rises by at least 7.5%, that QO would be based on $200K plus his minimum, not 125% of his prior salary.

The qualifying offer for a former first-round pick coming off his rookie scale contract is determined by his draft position. Under the previous CBA, the qualifying offer for a first overall pick was 130% of his fourth-year salary, while for a 30th overall pick it was 150% of his previous salary — QOs for the rest of the first-rounders fall somewhere in between. Those numbers will increase to 140% and 160%, respectively, under the new CBA, beginning when the 2023 draft class reaches restricted free agency in 2027.

The full first-round scale for the draft class of 2021, whose first-rounders will be hitting free agency this summer, can be found here, courtesy of RealGM.

A wrinkle in the Collective Bargaining Agreement complicates matters for some RFAs-to-be, since a player’s previous usage can impact the amount of his qualifying offer. Certain players who meet – or fail to meet – the “starter criteria,” which we break down in a separate glossary entry, become eligible for higher or lower qualifying offers. Here’s how the starter criteria affects QOs:

• A top-14 pick who does not meet the starter criteria will receive a same qualifying offer equal to 120% of the amount applicable to the 15th overall pick.
  • Note: In 2025, the value of this QO will be $7,976,830.
• A player picked between 10th and 30th who meets the starter criteria will receive a qualifying offer equal to 120% of the amount applicable to the ninth overall pick.
  • Note: In 2025, the value of this QO will be $8,741,210.
• A second-round pick or undrafted player who meets the starter criteria will receive a qualifying offer equal to 100% of the amount applicable to the 21st overall pick.
  • Note: In 2025, the value of this QO will be $5,386,773.

Warriors forward Jonathan Kuminga is one example of a player who falls into the first group, since he didn’t meet the starter criteria this year. The No. 7 overall pick in 2021, Kuminga will be eligible this offseason for a QO worth $7,976,830 instead of $10,240,287, the amount for his draft slot.

Conversely, Sixers wing Quentin Grimes (a former No. 25 overall pick) met the starter criteria and will now be eligible for a QO worth $8,741,210 instead of $6,311,825.

A qualifying offer is designed to give a player’s team the right of first refusal. Because the qualifying offer acts as the first formal contract offer a free agent receives, his team then receives the option to match any offer sheet the player signs with another club.

A player can also accept his qualifying offer, if he so chooses. He then plays the following season on a one-year contract worth the amount of the QO, and becomes an unrestricted free agent at season’s end, assuming he has at least four years of NBA experience. A player can go this route if he wants to hit unrestricted free agency as early as possible, or if he feels like the QO is the best offer he’ll receive. Accepting the qualifying offer also gives a player the right to veto trades for the season.

Here are a few more details related to qualifying offers:

• A team that issues a qualifying offer can unilaterally withdraw that offer anytime up until July 13.
• A player who receives a qualifying offer has a deadline of October 1 to accept it. He and the team can agree to extend that deadline.
• A different set of rules applies to players coming off two-way contracts. For most of those players, the qualifying offer would be equivalent to a one-year, two-way salary, with a small portion (known as the “maximum two-way protection amount”) guaranteed. For 2025/26, that partial guarantee projects to be worth $85,300.
• A player who is coming off a two-year, two-way deal; has already been on two-way deals with his current team for at least two seasons; or has accumulated four years of NBA service would be eligible for a qualifying offer equivalent to a standard, minimum-salary NBA contract, with a small portion (known as the “two-way QO protection amount”) guaranteed. For 2025/26, that partial guarantee projects to be worth $102,300.

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.

Earlier versions of this post were published in previous years.

The Rockets have just over $131MM in guaranteed money committed to player salaries for 2025/26. However, even though next season’s salary cap is expected to come in above $154MM, Houston won’t begin the 2025 offseason with $24MM+ in cap room to spend.

In fact, the Rockets technically won’t open the new league year with any cap space at all. Each of Houston’s own free agents will be assigned a free agent amount – or “cap hold” – until the player signs a new contract or the Rockets renounce his rights.

The general purpose of a cap hold is to prevent teams from using room under the cap to sign free agents before using Bird rights to re-sign their own free agents. If a team wants to take advantage of its cap space, it can renounce the rights to its own free agents, eliminating those cap holds. However, doing so means the team will no longer hold any form of Bird rights for those players — if the team wants to re-sign those free agents, it would have to use its cap room or another kind of cap exception.

The following criteria are used for determining the amount of a free agent’s cap hold:

• First-round pick coming off rookie contract: 300% of the player’s previous salary if prior salary was below league average; 250% of previous salary if prior salary was above league average.
• Bird player: 190% of previous salary (if below league average) or 150% (if above average).
• Early Bird player: 130% of previous salary.
• Non-Bird player: 120% of previous salary.
• Minimum-salary player: Two-year veteran’s minimum salary, unless the free agent only has one year of experience, in which case it’s the one-year veteran’s minimum.
• Two-way player: One-year veteran’s minimum salary.

A cap hold for a restricted free agent can vary based on his contract status. A restricted free agent’s cap hold is either his free agent amount as determined by the criteria mentioned above or the amount of his qualifying offer, whichever is greater.

No cap hold can exceed the maximum salary for which a player can sign. For example, the cap hold for an Early Bird player with a salary above the league average is generally 130% of his previous salary, as noted above. But for an Early Bird player like Rockets guard Fred VanVleet, whose cap charge is $42,846,615 this season, 130% of his previous salary would be approximately $55.7MM, well beyond his projected maximum salary.

Instead, assuming VanVleet’s team option is declined by Houston, his cap hold would be equivalent to the maximum salary for a player with between seven and nine years of NBA experience. Based on a projected cap of $154,647,000, that figure works out to $46,394,100. If the Rockets turn down VanVleet’s option and intend to re-sign him, that cap hold would remain on their books until his new deal is official and his new cap hit replaces the hold.

One unusual case involves players on rookie contracts whose third- or fourth-year options are declined. The amount of their declined option becomes their cap hold, and if the player’s team wants to re-sign him, his starting salary can’t exceed that amount.

For instance, the Grizzlies declined Jake LaRavia‘s 2025/26 fourth-year option last fall, then traded him to the Kings in February. Because LaRavia’s rookie scale option was turned down, Sacramento won’t be able to offer him a starting salary this offseason worth more than $5,163,127, the amount of that option. That figure is also his cap hold.

That rule is in place so a team can’t circumvent the rookie scale and decline its option in an effort to give the player a higher salary. It applies even if the player is traded after his option is declined, but only to the club the player is part of at season’s end. In other words, because LaRavia finished the year with the Kings, Sacramento is prohibited from offering him a starting salary greater than $5,163,127 as a free agent, but any other team – including Memphis – could exceed that figure.

If a team holds the rights to fewer than 12 players, cap holds worth the rookie minimum salary are assigned to fill out the roster. So, even if a front office chooses to renounce its rights to all of its free agents and doesn’t have any players under contract, the team wouldn’t be able to fully clear its cap.

An incomplete roster charge in 2025/26 projects to be worth $1,272,870, meaning a team without any guaranteed salary or any other cap holds would have closer to $139MM in cap room than $154MM+ due to its 12 rookie minimum holds.

A player who has been selected in the draft but has not yet officially signed his rookie contract only has a cap hold if he was a first-round selection. A cap hold for a first-round pick is equivalent to 120% of his rookie scale amount, based on his draft position. An unsigned second-round pick doesn’t have a cap hold.

Cap holds aren’t removed from a team’s books until the player signs a new contract or has his rights renounced by the club. For example, the Warriors are still carrying cap holds on their books for retired players like Matt Barnes and David West, who never signed new contracts since playing for Golden State nearly a decade ago.

Keeping those cap holds gives teams some degree of cushion to help them remain above the cap and take advantage of the mid-level exception and trade exceptions, among other advantages afforded capped-out teams. If and when the Warriors want to maximize their cap room, they’ll renounce Barnes and West, but they’ve remained over the cap – and haven’t needed to remove those holds – since those players became free agents in 2017 and 2018, respectively.

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.

Earlier versions of this post were published in previous years by Luke Adams and Chuck Myron.

Players and teams have to meet certain criteria to earn Bird rights and Early Bird rights, but Non-Bird rights are practically a given.

They apply to a player who has spent a single season or less with his team, as long as he finishes the season on an NBA roster and is on a standard contract (rather than a hardship or 10-day deal). Even a player who signs a rest-of-season contract right before the regular season finale and spends just a single day with his club would have Non-Bird rights in the offseason.

Teams can also claim Non-Bird rights on Early Bird free agents if they renounce them. The primary motivator to do so would be to allow the team to sign the free agent to a one-year contract, a move that’s not permitted via Early Bird rights.

Teams are eligible to sign their own free agents using the Non-Bird exception for a salary starting at 120% of the player’s previous salary, 120% of the minimum salary, or the amount of a qualifying offer (if the player is a restricted free agent), whichever is greatest. Contracts can be for up to four years, with 5% annual raises.

The cap hold for a Non-Bird player is 120% of his previous salary, unless his previous salary was the minimum. In that case, the cap hold is equivalent to the two-year veteran’s minimum salary. If a Non-Bird free agent only has one year of NBA experience, his cap hold is equivalent to the one-year veteran’s minimum salary.

The salary limitations that apply to Non-Bird rights are more severe than those pertaining to Bird rights or Early Bird rights, so in many cases, the Non-Bird exception may not be enough to retain a well-regarded free agent. For instance, the Bucks held Malik Beasley‘s Non-Bird rights last summer, but couldn’t have used them to match or exceed the offer the veteran wing received from the Pistons.

Because Beasley was on a minimum-salary contract in 2023/24, Milwaukee’s ability to offer a raise using the Non-Bird exception was extremely limited — the Bucks would have only been able to offer 120% of Beasley’s minimum salary using his Non-Bird rights, which worked out to $3,586,260. Detroit used its cap room to give Beasley a one-year, $6MM contract, easily topping Milwaukee’s maximum offer.

The Sixers may end up in a similar situation this offseason with Guerschon Yabusele, who will only have Non-Bird rights after playing out a one-year, minimum-salary contract. Philadelphia will only be able to offer him up to 120% of his 2025/26 minimum salary using the Non-Bird exception. That would work out to a projected $2.85MM.

Given how well Yabusele has performed this season, that likely won’t be enough to retain them, meaning the cap-strapped Sixers could have trouble making a competitive offer for the big man unless they can free up some mid-level exception money.

Holding Non-Bird rights on a free agent didn’t help the Bucks with Beasley and might not be enough for the Sixers with Yabusele, but there are cases in which the exception proves useful.

The Celtics, for instance, only had Non-Bird rights on Neemias Queta last offseason, but that gave them the ability to offer him a three-year contract, exceeding the one- or two-year minimum-salary offer they could have made if he were an outside free agent. Non-Bird rights also came in handy for a series of players involved in sign-and-trades, including Cody Zeller (Pelicans to Hawks), Charlie Brown Jr. (Knicks to Hornets), and Shake Milton (Knicks to Nets).

The higher a player’s previous salary is, the less restrictive his Non-Bird rights are. For example, after signing with the Spurs last summer, Chris Paul will only have Non-Bird rights this summer, but San Antonio would have significantly more flexibility than Denver will with Westbrook, since Paul is earning a $10.46MM base salary this season. The Spurs could offer Paul a starting salary of up to $12.55MM (120% of $10.46MM) using the Non-Bird exception.

Finally, it’s worth noting that a player who re-signs with his previous team on a one-year deal (or a two-year deal that includes a second-year option) and will have Early Bird or Bird rights at the end of that contract would surrender those rights if he consents to a trade. In that scenario, he’d only finish the season with Non-Bird rights. No players in that position this year consented to a trade.

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.

Earlier versions of this post were published in previous years by Luke Adams and Chuck Myron.

Bird rights offer teams the chance to sign their own free agents without regard to the salary cap, but they don’t apply to every player. Other salary cap exceptions are available for teams to keep players who don’t qualify for Bird rights. One such exception is the Early Bird, which applies to players formally known as Early Qualifying Veteran Free Agents.

While the Bird exception is for players who have spent three seasons with one club without changing teams as a free agent, Early Bird rights are earned after just two such seasons. Virtually all of the same rules that apply to Bird rights apply to Early Bird rights, with the requirements condensed to two years rather than three.

Players still see their Bird clocks restart by changing teams via free agency, being claimed in an expansion draft, or having their rights renounced. A player who is traded can also have his Bird clock reset if he approves a move after having re-signed with his previous team on a one-year contract (or a one-year contract with a second-year option) earlier in the league year.

As is the case with Bird rights, a player’s clock stops when he’s released by a team and clears waivers, but it would pick up where it left off if he re-signs with that same team down the road without joining another club in the interim.

For instance, if the Lakers were to re-sign Christian Wood this week, he would have Early Bird rights this offseason because – even though he was waived in February – he would be on track to finish a second consecutive season with Los Angeles and didn’t join another team in the interim.

Conversely, Lamar Stevens is an example of a player who won’t have Early Bird rights this offseason even though he’s finishing a second consecutive season with the Grizzlies. Stevens signed a contract with the Pistons between his stints in Memphis, resetting his Bird clock.

The crucial difference between Bird rights and Early Bird rights involves the limitations on contract offers. Bird players can receive maximum-salary deals for up to five years, whereas the most a team can offer an Early Bird free agent without using cap space is 175% of his previous salary (up to the max) or 105% of the league-average salary in the previous season, whichever is greater.

These offers are also capped at four years rather than five, and the new contracts must run for at least two years — the second season can be non-guaranteed, but can’t be a team or player option. Raises are maxed out at 8% per season.

Ty Jerome (Cavaliers) and Bruce Brown (Pelicans) are among the notable free agents who will have Early Bird rights during the 2025 offseason. Fred VanVleet (team option; Rockets) and Kelly Oubre (player option; Sixers) would join that group if their options are declined.

In some instances, teams can benefit from having Early Bird rights instead of full Bird rights if they’re trying to preserve cap space. The cap hold for an Early Bird player is 130% of his previous salary, significantly less than most Bird players, whose cap holds range from 150-300% of their previous salaries.

However, having a player’s Early Bird rights instead of his full Bird rights puts a team at a disadvantage in other cases. For example, when Isaiah Hartenstein reached free agency in 2024, his Early Bird rights limited the Knicks to a maximum four-year offer of $64.2MM ($72.5MM after incentives), a figure the Thunder had no problem topping when they signed Hartenstein to a three-year, $87MM deal.

In order to match or exceed Oklahoma City’s offer, New York would have had to use cap room, which the team didn’t have available — having Hartenstein’s full Bird rights would’ve allowed the Knicks to give him a far more substantial contract without requiring cap space.

Meanwhile, some players with limited NBA experience are subject to a special wrinkle involving Early Bird rights, called the Gilbert Arenas provision, which applies to players who have only been in the league for one or two years. We cover the Arenas provision in a separate glossary entry, so you can read up on the details there.

Essentially, the Arenas provision protects teams from a situation like the ones the Knicks found themselves in with Hartenstein, allowing them to match offer sheets on their restricted free agents without necessarily using Bird rights or cap room to do so.

During the 2023 offseason, Lakers guard Austin Reaves and Pelicans forward Herbert Jones were both Arenas free agents. Another Laker, Max Christie, and Pistons forward Simone Fontecchio were among the RFAs who fit the bill a year ago. There are no notable restricted free agents in 2025 on track to be subject to the Arenas provision, though there might be a small handful who fall into that category if they receive qualifying offers after having team options declined.

Finally, one more distinction between Bird rights and Early Bird rights applies to waivers. Players who are claimed off waivers retain their Early Bird rights, just as they would if they were traded. Those who had full Bird rights instead see those reduced to Early Bird rights if they’re claimed off waivers.

This rule stems from a 2012 settlement between the league and the union in which J.J. Hickson was given a special exception and retained his full Bird rights for the summer of 2012 even though he had been claimed off waivers that March.

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.

Earlier versions of this post were published in previous years by Luke Adams and Chuck Myron.

The Bird exception, named after Larry Bird, is a rule included in the NBA’s Collective Bargaining Agreement that allows teams to go over the salary cap to re-sign their own players. A player who qualifies for the Bird exception, formally referred to as a Qualifying Veteran Free Agent, is said to have “Bird rights.”

The most basic way for a player to earn Bird rights is to play for the same team for at least three seasons, either on a long-term deal or on separate one- or two-year contracts. Still, there are other criteria. A player retains his Bird rights in the following scenarios:

1. He changes teams via trade.

For instance, the Hawks will hold Caris LeVert‘s Bird rights when he reaches free agency this offseason, despite just acquiring him in February. His Bird clock didn’t reset when he was traded from Cleveland to Atlanta.

2. He finishes a third season with a team after having only signed for a partial season with the club in the first year.

The Cavaliers signed Sam Merrill during the second half of the 2022/23 season, adding him to their roster in March 2023. When his contract expires this offseason, Merrill will have Bird rights despite not spending three full seasons with Cleveland, because that partial season in ’22/23 started his Bird clock.

3. He signs a full-season contract (ie. not a 10-day deal), his team waives him, and he cleared waivers. He subsequently re-signs with the club (without joining another team in the interim) and ultimately remains under contract through a third season.

This one’s a little confusing, but let’s use former Lakers big man Christian Wood as an example. After spending the 2023/24 season with Los Angeles and opening the ’24/25 season on the roster, Wood was waived by the team in February.

If the Lakers were to re-sign Wood in July without him joining a new team in the interim, his Bird clock would pick up where it left off. He’d have full Bird rights in the summer of 2026, since he would’ve spent part or all of each of the previous three seasons with the Lakers without changing teams in between.

Although the Lakers could restart Wood’s Bird clock by re-signing him, they wouldn’t be able to use any form of Bird rights to add him to their roster this offseason — they would have to use cap room or another exception to do so. His Bird clock would only resume once he’s back under contract.

This rule also applies to players who are waived after they already have Bird rights. For example, let’s say the Heat were to waive Duncan Robinson this offseason before his $19.9MM salary for 2025/6 becomes guaranteed.

Miami, which doesn’t project to have cap room this summer, would have no means to re-sign Robinson except via the minimum salary exception or perhaps the mid-level exception, since waiving him would mean losing his Bird rights. But if they did find a way to re-add him on a one-year contract after waiving him, the Heat would regain Robinson’s full Bird rights in 2026.

A player sees the clock on his Bird rights reset to zero in the following scenarios:

1. He changes teams via free agency.
2. He is waived and is not claimed on waivers (except as in scenario No. 3 above).
3. His rights are renounced by his team. However, as in scenario No. 3 above, a player’s Bird clock picks up where it left off if he re-signs with the club that renounced them without having signed with another NBA team. For example, Kelly Oubre had Non-Bird rights last offseason, then had those rights renounced by the Sixers as they freed up extra cap room. Since Oubre eventually signed a new deal with Philadelphia, his Bird clock picked up where it left off — if he picks up his 2025/26 player option, he would have full Bird rights during the 2026 offseason.
4. He is selected in an expansion draft.

Players on two-way contracts accumulate Bird rights in the same way that players on standard contracts do. Jazz center Micah Potter has been under contract with Orlando on two-way deals in each of the past three seasons, so if he remains on his current two-way deal through the end of 2024/25, he’ll have full Bird rights this summer.

If a player who would have been in line for Bird rights at the end of the season is waived and claimed off waivers, he would retain only Early Bird rights.

It’s also worth noting that there’s one specific scenario in which a player with Bird rights can lose them in a trade. A player who re-signs with his previous team on a one-year contract (or a one-year deal with a second-year option) would have his Bird clock reset if he’s traded later that season. As such, he receives the ability to veto trades so he can avoid that scenario.

[RELATED: Players who had the ability to veto trades in 2024/25]

The Bird exception was designed to allow teams to keep their best players, even when those teams don’t have the cap room necessary to do so.

When a player earns Bird rights, he’s eligible to re-sign with his team for up to five years and for any price up to his maximum salary (with 8% annual raises) when he becomes a free agent, no matter how much cap space the team has — or doesn’t have.

The maximum salary varies from player to player depending on how long he has been in the league, but regardless of the precise amount, a team can exceed the salary cap to re-sign a player with Bird rights.

A team with a Bird free agent is assigned a “free agent amount” – also called a cap hold – worth either 190% of his previous salary (for a player with a salary below the league average) or 150% of his previous salary (for an above-average salary), up to the maximum salary amount.

For players coming off rookie scale contracts, the amounts of those cap holds are 300% and 250%, respectively. The Bulls, for instance, will have a cap hold worth $25,057,101 for Josh Giddey on their books this offseason — 300% of his $8,352,367 salary for 2024/25.

Chicago could renounce Giddey and generate an extra $25MM+ in cap flexibility, but doing so would cost the Bulls the ability to re-sign him using Bird rights, which would force them to use either cap room or a different cap exception to re-sign him. As such, we can probably count on Chicago keeping Giddey’s cap hold on the books until his free agency is resolved.

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.

Earlier versions of this post were published in previous years by Luke Adams and Chuck Myron.

If an NBA team’s salary continues to rise after it surpasses both the salary cap and the luxury tax line, it may reach or exceed one or both tax “aprons.” The level of the first tax apron is several million dollars above the threshold at which a team becomes a taxpayer, while the second tax apron is another $10MM+ beyond the first apron.

A team whose salary exceeds the first apron is prohibited from making certain moves during that league year, while a team whose salary goes beyond the second apron faces even more restrictions. The goal is to encourage competitive balance by limiting the ability of the teams with the NBA’s highest payrolls to further upgrade their rosters.

Although the tax apron isn’t a new addition to the NBA’s Collective Bargaining Agreement, the 2023 CBA represents the first time that the league’s cap system features multiple aprons. The 2023 CBA also introduced several new rules that apply to teams whose salaries are above one or both aprons.

Let’s dive in and break down the tax aprons in greater detail…

How are the tax aprons calculated?

The formula that determined the level of the first tax apron in 2024/25 was as follows:

• Formula: $172,345,814 x ($140,588,000 / $136,021,000)
• Result: $178,132,000
  • Note: The result was rounded to the nearest thousand.

These may just look on the surface like a collection of random numbers, but there’s a method to the madness. $172,345,814 was the result of last season’s first apron calculation (it was rounded to the nearest thousand, $172,346,000, for functional purposes); $140,588,000 is this season’s salary cap; and $136,021,000 was last season’s cap.

In other words, the first apron is simply rising by the same rate as the salary cap. That will continue to be the case going forward.

Like the first apron, the second apron will increase at the same rate as the cap each season, meaning the formula for 2024/25 was as follows:

• Formula: $182,793,814 x ($140,588,000 / $136,021,000)
• Result: $188,931,000
  • Note: The result was rounded to the nearest thousand.

In future seasons, the current-year salary cap amount will be substituted into these two formulas in place of $140,588,000 to determine that season’s first and second tax aprons.

What restrictions does a team face if its salary is above the first tax apron but below the second apron?

When implementing its new CBA in 2023, the NBA gradually phased in the restrictions facing teams operating above the tax aprons over the course of two seasons. That gave those teams an opportunity to adjust their rosters to account for the new apron-related rules.

As of the 2024/24 season, all of the new restrictions are in effect.

Here are the moves that a team whose salary is above the first tax apron – but below the second apron – is prohibited from making in 2024/25 and beyond:

1. Acquiring a player via sign-and-trade.
2. Using any portion of the bi-annual exception for any transaction.
3. Using any portion of the non-taxpayer mid-level exception to acquire a player via trade or waiver claim.
4. Using more than the taxpayer portion of the mid-level exception to sign a player.
5. Signing a player who was waived during the current season if his pre-waiver salary for that season exceeded the amount of the non-taxpayer mid-level exception.
6. Using one or more outgoing players in a trade for matching purposes to take back more than 100% of the outgoing salary.
7. Using 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).

It’s worth clarifying a few points related to these restrictions.

A team operating above the first apron doesn’t have access to the bi-annual exception or non-taxpayer mid-level exception, both of which can be used to sign a player or to acquire a player via trade or waiver claim. First-apron teams can use the taxpayer mid-level exception, but it can only be used to sign a player, not to acquire one via trade or waiver claim.

A team restricted to the taxpayer form of the mid-level can’t exceed its limits in dollars or years. For instance, in 2024/25, the taxpayer mid-level exception can be used to sign a player to a deal with a starting salary of up to $5,168,000 for up to two years. That means a team using its mid-level exception to sign a player to a three-year contract worth $3MM annually would have to use the non-taxpayer MLE to do so, since the deal would only fit within the taxpayer MLE in terms of money, not years.

The fifth item in the list above is important to remember after the trade deadline when certain veterans negotiate contract buyouts. If the player’s salary exceeds the full value of the non-taxpayer mid-level exception ($12,822,000 in 2024/25), he would be ineligible to sign with a team operating above the first apron once he clears waivers and reaches free agency — even if he negotiates a buyout that reduces his salary to below that non-taxpayer MLE amount.

The sixth item in the list only applies in instances where salary-matching is necessary. For example, a team operating above the first tax apron could send out a player earning $10MM in exchange for a player earning $9.5MM and a second player on a one-year, minimum-salary contract — even though the club would technically be taking back more total salary than it’s sending out, the minimum-salary player can be acquired using the minimum salary exception, so the $10MM player is only being used to match the $9.5MM player’s incoming salary.

In regard to the seventh item, let’s say a team operating above the first apron currently has one traded player exception worth $5MM, then generates another one worth $8MM at the 2025 trade deadline. Both of those exceptions would become unavailable once the team’s 2025 offseason begins.

That club could subsequently make a draft-night deal that generates a new $7MM trade exception and use it at any point between its creation and the end of the 2025/26 regular season. But if that team continues operating above the first apron, that $7MM TPE would once again become unavailable once the 2026 offseason begins, prior to its typical one-year expiration date.

What restrictions does a team face if its salary is above the second tax apron?

A team whose salary is above the second tax apron is prohibited from making any of the moves unavailable to teams above the first apron, as described above. That includes acquiring a player via sign-and-trade, using any portion of the bi-annual exception, and so on.

Additional restrictions also apply to teams operating above the second apron. Here are the moves that teams above the second tax apron are prohibited from making in 2024/25 and beyond:

1. Using any portion of the mid-level exception.
2. Aggregating two or more player salaries in a trade.
3. Sending out cash as part of a trade.
4. Acquiring a player via trade by using a signed-and-traded player for salary-matching purposes.
5. Acquiring a player via trade using a traded player exception if that TPE was generated by sending out a player via sign-and-trade.

Teams above the second tax apron will face one more draft-related restriction beginning in the 2025 offseason. If the team’s salary exceeds the second apron at the end of a season, its first-round pick in the draft seven years away will be “frozen” — in other words, that pick would not be tradable.

If the team’s salary exceeds the second apron in at least two of the following four seasons (three of five in total), the frozen pick would move to the end of the first round for that draft. Conversely, if the team stays below the second apron for at least three of the subsequent four seasons, its pick becomes “unfrozen” and is once again tradable.

Let’s use the Suns as an example, since they’re a lock to finish the 2024/25 league year above the second tax apron. That would result in their 2032 first-round pick becoming frozen, ineligible to be traded once the ’25/26 league year begins. If their team salary remains above the second apron for at least two more seasons between ’25/26 and ’28/29, their frozen pick would move to the end of the 2032 first round and would remain ineligible to be dealt.

If multiple teams have a frozen pick moved to the end of the first round in a particular draft, they would make their selections in reverse order of their place in the NBA standings in the season prior to that draft. For example, if both the Suns and Celtics have their 2032 first-rounders moved to the end of the round and Boston finishes ahead of Phoenix in 2031/32, the Suns would pick ahead of the Celtics in that draft.

Can a team that begins a league year above the first or second tax apron gain the ability to make additional moves by reducing its salary and dipping below the apron(s)?

Yes. If a club were to open the 2025/26 league year carrying $200MM in salary, then engaged in a series of salary-dump trades that reduce its team salary to $150MM, it would no longer be subject to the restrictions facing an apron team.

The apron restrictions that apply to a team are determined by its salary position upon the conclusion of a given transaction. That means that if a second-apron club agrees to a trade that will move its team salary below the second apron, it could aggregate salaries and/or send out cash as part of that deal.

However, as long as the team’s salary remains above the first or second apron – or if the team is completing a transaction would push its salary above one apron or the other – that team is subject to the rules that apply to that apron level.

Critically, it’s worth noting that once a club engages in a roster move that is prohibited for a team above the first or second apron, that club will be hard-capped for the rest of the season at that apron level.

In 2024/25, for instance, teams like the Kings and Hornets acquired players via sign-and-trade, the Warriors and Mavericks used the non-taxpayer mid-level exception, and the Thunder and Pelicans took back more than 100% of their outgoing salary in trades. As a result, those teams are a few of the many that are hard-capped at the first apron ($178,132,000) and aren’t permitted to surpass that salary level for the rest of ’24/25.

The Nuggets, Pacers, and Knicks are the three teams currently hard-capped at the second apron ($188,931,000) this season. Denver used the taxpayer mid-level exception, Indiana sent out cash in a trade, and New York aggregated salaries in a trade.

Finally, there’s one more important point related to apron level restrictions and hard caps: A team that engages in any of the trade-related transactions prohibited for first or second apron teams between the end of the regular season and the end of that league year on June 30 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 2025, that team won’t be allowed to exceed the second tax apron during the 2025/26 league year. The inverse is also true — a team whose 2025/26 salary projects to be over the second apron won’t be able to trade cash in June 2025.

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.

Anything else I should know about the tax aprons?

It’s worth pointing out that a club with a number of incentive bonuses on its books may find itself operating above the first or second apron even if its base team salary doesn’t exceed those levels.

For the purposes of calculating a team’s salary, a player’s likely incentives are included in his cap hit, but his unlikely incentives aren’t (an incentive is considered likely to be earned if it was achieved last season and unlikely to be earned if it wasn’t). However, for the purposes of determining a team’s apron level, all those incentives are counted.

That means a team with a $175MM base salary and an additional $5MM in unlikely incentives in 2024/25 would be considered a first apron team and would be unable to make certain roster moves, since there’s a chance those incentives could be earned, pushing the club’s salary above $178,132,000.

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.

An earlier version of this post was published in 2023.

The term “tax variance” doesn’t technically show up in the NBA’s Collective Bargaining Agreement, but it’s used colloquially to refer to instances in which a team’s salary for the purposes of calculating its end-of-season luxury tax bill diverges from its standard salary relative to the cap.

This can occur for a number of reasons, including player suspensions, incentives being met (or not), and certain free agent signings. Here’s a breakdown of how each of those occurrences affect a team’s salary for tax purposes:

Suspensions

When a player is suspended by the NBA, he forfeits a percentage of his salary. That percentage ranges from as low as 1/174th for a standard one-game suspension to as high as 1/91.6th for a suspension related to a failure to render services.

In each instance, a team receives a tax variance credit for 50% of the player’s forfeited salary. That means that if a player loses $1MM as a result of a suspension, his team receives a tax variance credit worth $500K.

That amount doesn’t come off the player’s cap hit or the standard team salary, which remain the same for the rest of the season. But for the purposes of calculating a team’s tax bill at the end of the season, the club’s total taxed salary is reduced by $500K as a result of the suspension.

The tax variance credit doesn’t apply to a suspension imposed by the player’s team, since it could open the door for clubs to try to reduce their tax bills or duck the tax entirely by suspending their players.

A player still forfeits a portion of his salary when he’s suspended by his team (subject to appeal), but his team doesn’t generate any cap or tax savings.

For instance, when the Heat suspended Jimmy Butler for seven games, it cost him $2,355,798 (7/145ths of his $48,798,677 salary), but it didn’t change Miami’s cap or tax situation at all.

Unlikely incentives that are earned / Likely incentives that go unearned

When a player’s contract includes incentives, they’re considered either “likely” or “unlikely” to be earned. Likely incentives count toward a player’s cap hit for that season, while unlikely incentives don’t.

An incentive is deemed likely or unlikely based on whether or not the player and/or his team met the incentive criteria the previous season. So if a player’s contract calls for a bonus if his team wins the title, he’s considered “likely” to earn it if his team won the championship the year before — even if, in reality, his team isn’t literally likely to repeat.

Here’s a more detailed example. Let’s say a player has a $20MM annual base salary, plus a $1MM incentive if his team wins at least 40 games, another $1MM incentive if his team makes the playoffs, and a third $1MM incentive if he appears in at least 65 games.

If the player appeared in 70 games the prior season and his team finished 41-41, missing the playoffs, he would’ve earned two of those three $1MM bonuses. That means that for the subsequent season, his cap hit would be $22MM, with $2MM in likely incentives counting against the cap and $1MM in unlikely incentives not counting toward his cap charge.

That $22MM is the player’s cap hit for the rest of the season, but his team is subject to tax variance depending on whether or not he earns those incentives again. If the player appears in just 50 games and his team wins 35, missing the postseason, he’d miss out on all three bonuses and his team would receive a tax variance credit of $2MM for the two likely incentives he didn’t end up earning.

Conversely, if the player stays healthy, appears in 75 games, and leads his team to a 50-win season and a playoff berth, he’d earn all of his incentives, including the $1MM that had been considered unlikely. That tax variance would be taken into account for the team, with $1MM being added to its salary for the purposes of calculating its tax bill.

If we assume our hypothetical team entered the season with its player counting toward the cap for $22MM and its total salary at $180MM, tax variance could result in that total ending up as low as $178MM or as high as $181MM by the end of the season, which could significantly change the team’s final tax payment.

Signings of free agents with fewer than two years of NBA service

A rookie’s minimum salary is significantly less than that of a veteran player. But a team looking to duck the tax while filling out its back-end roster spots can’t simply sign a handful of rookie free agents to maximize its savings.

When a player with fewer than two years of NBA service signs a free agent contract worth less than a two-year veteran’s minimum salary, tax variance applies — for tax purposes, that player counts for the same amount that a two-year veteran on a minimum deal would.

The rookie minimum salary for 2024/25 is $1,157,153, whereas the minimum for a two-year veteran is $2,087,519. If a team signed a rookie free agent to a minimum-salary contract this season, that player’s salary and cap hit would be just $1,157,153, but he would count for $2,087,519 toward the tax.

If that player signed a two-year, minimum-salary contract, his salary and cap hit in 2025/26 would be $1,955,377, but he’d count for $2,191,897 toward the tax (those figures can be found in the second column of our minimum-salary chart).

Because this tax variance only applies to free agents, teams can avoid it by signing a rookie draft pick to a minimum-salary contract. That’s why we often see taxpaying clubs prioritize second-round picks — they can use those selections to draft a player who will sign a rookie minimum contract and actually have that modest rookie-minimum figure count for tax purposes. Tyler Smith of the Bucks and Oso Ighodaro of the Suns are a couple 2024 second-rounders on second-apron teams who fall into this category.

It’s worth noting that the same rule applies when a team is converting a player to a standard contract from a two-way deal. If the player was initially signed as a draft pick, tax variance won’t apply to him. If he signed as a free agent, it will.

This is why the Knicks, when they were looking to remain below their hard cap while filling out their roster back in the fall, had the option to convert Ariel Hukporti or Kevin McCullar (both 2024 second-rounders) from two-way deals to rookie-minimum contracts to stay below the hard cap, but couldn’t do so with Jacob Toppin, who signed initially as a free agent. Tax variance would’ve applied to Toppin, who would’ve counted for tax (and apron) purposes as if he were a veteran free agent, even though he only had one year of NBA service on his résumé.

New York ultimately converted Hukporti, whose prorated minimum deal is worth just $1,064,049 for cap, tax, and apron purposes.

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. Information from ESPN’s Bobby Marks was used in the creation of this post.

The NBA’s salary cap is a “soft” cap, which is why most teams’ salaries have surpassed the $140,588,000 threshold for the 2024/25 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 ($170,814,000 in ’24/25). 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 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 or to acquire a player via trade or waiver claim.
2. The team uses more than the taxpayer portion of the mid-level exception to sign a player (or multiple players).
   • Note: In 2024/25, the taxpayer MLE is worth $5,168,000, compared to $12,822,000 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 uses any portion of its mid-level exception to acquire a player via trade or waiver claim.
4. The team acquires a player via sign-and-trade.
5. The team signs a player who was waived during the current regular season and whose pre-waiver salary exceeded the amount of the non-taxpayer mid-level exception for that season.
6. The team takes back more than 100% of the salary it sends out in a trade via salary-matching.
7. 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 making any of those 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 2024/25 league year, the first apron is set at $178,132,000, which is $7,318,000 above the tax line. A team that completes one of the 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 (up to the taxpayer amount) to sign a player.
2. The team aggregates two or more player salaries in a trade.
3. The team sends out cash as part of a trade.
4. The team sends out a player via sign-and-trade and either uses that player’s outgoing salary to take back a contract or uses the resulting traded player exception to acquire a player via trade or waiver claim.

For the 2024/25 league year, the second apron is set at $188,931,000, which is $18,117,000 above the tax line.

So far in ’24/25, a total of 15 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, taking back more than 100% of the outgoing salary in a trade, or using a traded player exception generated last season.

Three more teams have hard-capped themselves at the second apron by using the mid-level exception, aggregating player salaries, sending out cash in a trade, or taking back salary for a player sent out via sign-and-trade.

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, including the Warriors, Mavericks, and Knicks, 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 Bucks are currently operating above the second apron, but if they were to shed significant salary in a trade and then aggregated salaries in a subsequent deal, a hard cap would be imposed and they’d be ineligible to surpass the $188.9MM 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.

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, under the current CBA, 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 2025, that team won’t be allowed to exceed the second tax apron during the 2025/26 league year. The inverse is also true — a team whose 2025/26 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.

We go into more detail in a separate story on the transactions that result in hard caps for NBA teams.

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, 2021, and 2023.