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The mid-level exception is the tool most frequently used by over-the-cap teams to sign free agents from other teams to contracts worth more than the veteran’s minimum. But that’s not the only exception those clubs have to squeeze an extra player onto the payroll. The bi-annual exception is a way for a team to sign a player who may command more than the minimum salary but less than the mid-level.

In addition to allowing a team to sign a player to a contract, the bi-annual exception can be utilized to acquire a player via trade or waiver claim, as long as his contract fits within his exception. That means he can’t be under contract for more than two years and his current-year salary can’t exceed the amount of the BAE.

As its name suggests, the bi-annual exception can only be used every other season. Even if a team uses only a portion of the exception, it’s off-limits during the following league year.

During the 2025/26 league year, two teams – the Rockets and Clippers – were ineligible to use the bi-annual exception at all, since they used it in 2024/25.

Five teams have used the bi-annual exception in ’25/26, with the Lakers signing Marcus Smart, the Pistons promoting Daniss Jenkins from a two-way contract, and the Hornets, Jazz, and Wizards using their BAEs to trade for Malaki Branham, Kevin Love, and Blake Wesley, respectively. Those five clubs won’t have the exception at their disposal during the 2026/27 league year.

The bi-annual exception is available only to a limited number of clubs, even among those that didn’t use the exception during the previous season. Teams that create and use cap space forfeit their bi-annual exception. Additionally, teams lose access to the bi-annual exception when they operate over the first “tax apron,” a figure approximately $7MM above the tax line this season. So, only teams over the cap and under the first apron can use the BAE.

If a team uses all or part of the bi-annual exception, the first tax apron becomes the club’s hard cap for that season. Teams that sign a player using the BAE are permitted to subsequently go under the salary cap, but they can’t go over the first apron at any time during the season once the contract is signed.

[RELATED: NBA Teams With Hard Caps In 2025/26]

Although a team with a salary exceeding the first tax apron isn’t permitted to use the bi-annual exception, that team could gain access to the BAE by shedding salary. As long as the team’s salary would be below the first tax apron upon the completion of the BAE transaction – and remains below that threshold for the rest of the season – that club is permitted to use the exception, no matter how high its salary might have been earlier in the league year.

Under the NBA’s current Collective Bargaining Agreement, the value of the bi-annual exception in future league years is tied to the value of the salary cap. The BAE comes in at 3.32% of that season’s cap and is rounded to the nearest thousand.

For instance, this season’s cap is $154,647,000; 3.32% of that amount is $5,134,280.40. Rounding to the nearest thousand gets us to $5,134,000, which is the maximum starting salary for a bi-annual signing in 2025/26. The starting salary for the BAE in 2026/27 currently projects to be worth $5,511,000, based on a $166MM cap projection.

A player who signs a contract using the bi-annual exception is eligible for a one- or two-year deal, with a 5% raise for the second season. For a player signed using the BAE in 2025/26, the maximum value of a two-year contract is $10,524,700.

Teams also have the option of splitting the bi-annual exception among multiple players, though that happens much less frequently than it does with the mid-level exception, since a split bi-annual deal may not even be worth more than a veteran’s minimum salary.

The bi-annual exception begins to prorate downward on January 10 each year, decreasing in value by 1/174th each day until the end of the regular season. However, as is the case with the mid-level exception, a team that uses its BAE between Jan. 10 and the trade deadline wouldn’t be subject to that proration and could use the full amount it has left on the exception — the proration for those days between Jan. 10 and the deadline is retroactively applied beginning on the day after the trade deadline.

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 mid-level exception is one of the tools that allows over-the-cap NBA teams to sign free agents from other clubs for more than the minimum salary. It helps ensure that virtually every team heads into the offseason with a little spending flexibility.

Teams are eligible to use specific types of mid-level exceptions depending on their proximity to the salary cap. The most lucrative form of mid-level is available to teams that are over the cap but below the first tax apron. Clubs above the first apron, and even those operating under the cap, have access to lesser versions of the MLE.

Here’s a breakdown of how the various forms of the exception are structured:

For teams over the cap and below the first tax apron:

• Commonly called either the full mid-level exception or the non-taxpayer mid-level exception.
• Contract can cover up to four seasons.
• First-year salary is worth $14,104,000 in 2025/26; maximum four-year value is $60,647,200.
• Projected to be worth $15,139,000 in 2026/27; projected maximum four-year value is $65,097,700.
• Once used, the team cannot surpass the first tax apron (approximately $7MM above the tax line in 2025/26) for the remainder of the season.
• This form of mid-level exception can be used to acquire a non-free-agent via trade or waiver claim, as long as his contract fits into the exception (in terms of years and dollars). Only the player’s current-year salary must fit into the MLE.

For teams operating under the cap:

• Commonly called the room exception.
• Contract can cover no more than three seasons.
• First-year salary is worth $8,781,000 in 2025/26; maximum three-year value is $27,660,150.
• Projected to be worth $9,425,000 in 2026/27; projected maximum three-year value is $29,688,750.
• This form of mid-level exception can be used to acquire a non-free-agent via trade or waiver claim, as long as his contract fits into the exception (in terms of years and dollars). Only the player’s current-year salary must fit into the room exception.

For teams over the cap and the first tax apron, but below the second apron:

• Commonly called the taxpayer mid-level exception.
• Contract can cover up to two seasons.
• First-year salary is worth $5,685,000 in 2025/26; maximum two-year value is $11,654,250.
• Projected to be worth $6,102,000 in 2026/27; projected maximum two-year value is $12,509,100.
• Once used, the team cannot surpass the second tax apron (approximately $20MM above the tax line in 2025/26) for the remainder of the season.
• This form of mid-level exception cannot be used to acquire a non-free-agent via trade or waiver claim.

For teams over the cap and both tax aprons:

• No mid-level exception is available.

Each form of the mid-level allows for annual raises of up to 5% of the value of the first season’s salary.

Teams can use their entire mid-level exception to sign a single player. The Pistons, Trail Blazers, Grizzlies, and Warriors took that route in 2025/26. Detroit and Portland used the full non-taxpayer mid-level exception ($14,104,000) on Caris LeVert and Damian Lillard, respectively; Memphis used its full room exception ($8,781,000) on Ty Jerome; and Golden State used its full taxpayer mid-level exception ($5,685,000) on Al Horford.

The Mavericks also only had the taxpayer portion of the mid-level exception available when they signed D’Angelo Russell to a two-year contract with a first-year salary of $5,685,000, though they’ve since moved below the tax line and are no longer limited to the taxpayer MLE.

Teams are also allowed to split the mid-level among multiple players, and that’s the route that many clubs prefer to take. For instance, the Wizards have used their MLE to acquire Russell ($5,685,000) and to sign Tristan Vukcevic ($2,857,143) and Jamir Watkins ($1,131,970) so far in ’25/26. They still have a small portion of the non-taxpayer mid-level available.

In the past, players drafted in the second round often signed contracts using a portion of the mid-level because the exception allows teams to offer more years and more money than the minimum salary exception provides. However, the second-round pick exception introduced in the league’s most recent Collective Bargaining Agreement has essentially eliminated the need for teams to use the MLE on second-round picks.

Still, if a team wants to sign an undrafted free agent to a longer-term contract or convert a two-way player to a multiyear deal, the mid-level can come in handy. Seven players who have been promoted from two-way deals to standard contracts in 2025/26 have been signed using the mid-level exception.

Some front offices prefer to leave all or part of their mid-level exception unused in the offseason so it’s still available during the regular season. This has become an increasingly common course of action, since the new CBA allows teams to use the non-taxpayer mid-level or room exception to take on players via trades. Even after the trade deadline passes, an unused portion of an MLE can still be useful to outbid a rival for a coveted target on the buyout market or to lock up an intriguing young player to a longer-term contract.

Unlike the bi-annual exception, the mid-level exception can be used every season. So whether or not a team uses any of its mid-level in 2025/26, each club below the second tax apron in ’26/27 will have the opportunity to use some form of the MLE.

The amount of each form of mid-level exception increases – or decreases – at the same rate as the salary cap, ensuring that its value relative to cap room remains about the same from year to year. So if the salary cap rises by 10%, the mid-level values would rise by the same amount.

Specifically, the CBA calls for the non-taxpayer mid-level exception to be worth 9.12% of the cap, while the room exception is worth 5.678% of the cap. Those figures are rounded to the nearest thousand.

Here are a few more notes related to the mid-level exception:

• A contract signed using a mid-level exception can include bonuses as long as the player’s maximum potential compensation doesn’t exceed the maximum value of the exception. For example, in 2025/26, a team wasn’t permitted to sign a player to a contract using the non-taxpayer mid-level exception that has a base salary of $14,104,000 and another $1MM in incentives. But a contract with a base salary of $13,104,000 and $1MM in incentives would have been permitted.
• A team is only allowed to use one form of mid-level exception in a given season. If an over-the-cap club uses a portion of its non-taxpayer mid-level exception, then sheds salary and dips below the cap, it would not then be permitted to use the room exception.
• Beginning on January 10, the value of a team’s unused mid-level exception begins to prorate downward. The exact amount of proration depends on how much of the MLE was unused as of January 10 and how many total days there are in the regular season. If a team had $7MM of its mid-level left on January 10 and there are 174 days in that season, the MLE would decrease in value by $40,230 per day (1/174th of $7MM).
• Crucially, this proration is retroactively applied beginning on the day after the trade deadline and doesn’t affect moves completed between January 10 and the trade deadline. This rule allows teams to fully access the remaining portion of their mid-level for deadline deals. That means that our hypothetical team with $7MM left on its mid-level as of January 10 would still have been able to use that full $7MM up until February 5 this season. But if it didn’t use any of its MLE between January 10 and the deadline, then as of February 6, that figure would drop to $5,873,563 (having decreased by $1,126,437, which is 28/174ths of $7MM).

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.