Hoops Rumors Glossary: Hard Cap

The NBA’s salary cap is a “soft” cap, which is why most clubs’ team salary will easily surpass the $112,414,000 threshold at some point during the 2021/22 season, if it hasn’t already. 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 ($136,606,000 in ’21/22). 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. Those scenarios are as follows:

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 2021/22, the taxpayer MLE is worth $5,890,000, compared to $9,536,000 for the full non-taxpayer MLE. The taxpayer MLE can be used to complete deals up to three 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.

A team making any of those three roster moves must ensure that its team salary is below the “tax apron” when it finalizes the transaction and stays below the apron for the rest of the league year. The tax apron was set $6MM above the luxury tax line in 2017/18 (the first year of the current Collective Bargaining Agreement) and creeps up a little higher each season as long as the cap keeps increasing.

For the 2021/22 league year, the tax apron is set at $143,002,000. A hard-capped team can’t surpass that line under any circumstances.

In 2020/21, a total of 18 teams imposed a hard cap on themselves by acquiring a player via sign-and-trade, using the non-taxpayer mid-level exception, or using the bi-annual exception. For many of those teams, the restriction was barely noticeable — they remained far below the tax apron and never had to worry about whether a roster move might put them over the hard cap.

However, there were a handful of teams – including the Lakers, Clippers, and Bucks – who had to be conscious of the hard cap all year long and carried an empty 15-man roster spot for much of the season. Even an extra minimum-salary player would’ve compromised the ability of those teams to stay below the hard cap.

Once the 2020/21 league year ended last week and the ’21/22 league year began, the 18 teams that were hard-capped a year ago once again became free to surpass this year’s tax apron. So far, nine teams have imposed a hard cap for themselves at $143MM in 2021/22 as a result of recent roster moves.

Finally, 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 apron, but in the unlikely event that they made a few cost-cutting moves and then acquired a player via sign-and-trade, a hard cap would be imposed and they’d be ineligible to surpass the $143MM apron for the rest of the league year.

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

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 and the Basketball Insiders salary pages were used in the creation of this post.

A previous version of this post was published in 2020.