How Do NBA Contracts and the Salary Cap Work?

The NBA offseason is marked by drama, excitement and Woj bombs, but it is also defined by a flurry of confusing terms such as “non-taxpayer mid-level exception” and “designated veteran player extension.” There’s also a lot of discussion of aprons, even though there is no cooking involved.

So, if you’re confused about why your favorite team can’t sign your favorite player or why certain players are earning more than others, we’ve got you covered. Here’s an explainer of how NBA contracts work.

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What is the NBA salary cap?

The salary cap is a set amount of money designed to limit what teams can spend on player payroll. The number is determined for each season based on a percentage of projected basketball-related income for the upcoming year. In 2024-25, the salary cap will be $140.588 million.

Unlike the NHL, which has a “hard cap” that cannot be exceeded under any scenarios, the NBA has a “soft cap” (like a yarmulke). NBA teams are allowed to go over the salary cap by design using a variety of exceptions outlined in the collective bargaining agreement (CBA) that are explained below. In the 2023-24 season, 29 of the league’s 30 teams spent more than the cap on player salaries.

Owners are required to spend at least 90% of the salary cap in any given season to ensure that players receive their fair share of league revenues. Still, the cap ultimately serves to control owners’ costs. It also promotes parity by preventing large disparities in spending by different teams, which occurs in MLB, for instance.

What is the NBA luxury tax?

If a team’s payroll exceeds a certain threshold greater than the salary cap, then that team must pay a tax. This season, franchises start by paying $1.50 to the league for every dollar they go over the threshold, and the rate incrementally increases the further they go over. Additionally, the league imposes a repeat offender penalty (an additional dollar-for-dollar tax over the payroll threshold) for those who paid a tax in three of the previous four seasons.

Over the past decade, roughly a quarter of teams have paid the tax in any given…

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Author : Sportico

Publish date : 2024-07-05 15:45:18

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