Hoops Rumors Originals

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 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, if his pre-waiver salary for 2023/24 exceeded the amount of the non-taxpayer mid-level exception ($12,405,000).
6. 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 six 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 six 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 to sign a player.

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 that was created by sending out a player via sign-and-trade.
   • Note: This applies whether the traded player exception is generated as part of a simultaneous trade (ie. using an outgoing signed-and-traded player for matching purposes) or non-simultaneous trade (ie. in a subsequent trade, using a TPE previously generated 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.

When an NBA team is over the salary cap and wants to make a trade, certain rules in the Collective Bargaining Agreement dictate how much salary the team is permitted to take back. These salary-matching rules are evolving – they changed prior to this season and will change again in 2024 – but in most cases, an over-the-cap team must send out nearly as much salary as it acquires for the trade to be legal.

In some scenarios, salary aggregation is required in order to legally match the incoming player’s cap hit. Aggregation is the act of combining multiple players’ salaries in order to reach that legal outgoing limit.

For example, let’s say Team A has a team salary above the first tax apron and wants to acquire a player earning $30MM from Team B. Sending out a player earning $25MM would fall short of the minimum requirement, since Team A can only bring back up to 110% of the outgoing amount. Trading a $25MM player would allow the team to acquire up to $27.5MM in salary.

However, by adding a second player earning $3MM to its package, Team A would reach the minimum outgoing threshold by “aggregating” its two traded players, resulting in a total of $28MM in outgoing salary — that’s enough to bring back a $30MM player.

Only player salaries can be aggregated. Trade exceptions cannot be aggregated with one another or with players. That means a team with a $10MM trade exception can’t aggregate that exception with a $20MM player (or a separate $20MM trade exception) to acquire a $30MM player.

Crucially, sending out two players together in a trade doesn’t necessarily mean they have to be aggregated.

For instance, if Team A sends out one player earning $28MM and another earning $5MM in exchange for its incoming $30MM player, there’s no need to aggregate the two outgoing salaries. Since $28MM is an amount sufficient to take back $30MM, the $5MM player can essentially be traded for “nothing,” creating a $5MM trade exception that could be used at a later date.

Because trade exceptions can only be created in “non-simultaneous” trades and salary aggregation can only be completed in a “simultaneous” trade, trade exceptions can’t be generated in scenarios in which salaries are aggregated. In the hypothetical trade above, swapping the $28MM player for the $30MM player represents a simultaneous trade, while sending out the $5MM player represents a non-simultaneous trade, resulting in the trade exception.

Here’s another example to illustrate that point, using the same $30MM incoming player: If Team A decides to salary-match by sending out one player earning $20MM and a second earning $15MM, that team can’t generate a trade exception worth the excess amount ($5MM), because the two outgoing salaries must be aggregated, resulting in a simultaneous trade.

One good recent example of salary aggregation came when the Clippers acquired James Harden and P.J. Tucker from the Sixers last month. Harden ($35,640,000) and Tucker ($11,014,500) were earning a combined $46,654,500, so the Clippers – whose team salary was above both tax aprons – needed to send out at least $42,413,182 to get to within 10% of that amount.

Paul George or Kawhi Leonard are each earning more than $42.4MM on their own, but they weren’t going to be part of the deal with Philadelphia and no other Clipper was making close to that amount, so the team had to aggregate several players’ salaries in order to meet the required threshold. Los Angeles used Marcus Morris ($17,116,279), Nicolas Batum ($11,710,818), Robert Covington ($11,692,308), and KJ Martin ($1,930,681) to get there.

Because the Clippers’ four outgoing players combined to earn $42,450,086, the team was able to take back up to $46,695,095 (110% of the outgoing amount). That means that Harden was able to receive a small portion ($40,595) of his trade bonus while waiving the remaining amount. If Harden had insisted on receiving even one more dollar of his bonus, the Clippers would have had to aggregate a fifth salary to make the deal work.

The NBA’s trade rules state that when a team acquires a player using salary-matching or a trade exception (rather than cap room), it cannot aggregate that player’s salary in a second trade for two months.

The one exception to that rule occurs if a player is traded on or before December 16, but less than two months until that season’s trade deadline. In that case, the player is permitted to be aggregated again either on the day before the deadline or the day of the deadline.

Any player traded after December 16 can’t have his salary aggregated with another player’s before the trade deadline. But, as outlined above, that doesn’t mean that a player acquired after today can’t be traded again before the deadline along with other players — it simply means his salary can’t be aggregated as part of the deal.

Here are a couple more notes related to salary aggregation:

• Beginning in the 2024 offseason, a team whose total salary is above the second tax apron will not be permitted to aggregate salaries as part of a trade. A team that does aggregate salaries in a trade will become hard-capped at the second apron for the rest of that league year (or for the following league year, if the trade is made between the end of the regular season and June 30).
• If a team is aggregating three (or more) player salaries in a trade for matching purposes in order to take back fewer players than that, no more than one of the aggregated players can be earning the minimum salary. This rule doesn’t apply between December 15 and the trade deadline, but is in effect the rest of the 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.

A previous version of this post was published in 2022.