The NBA salary cap explained simply: cap, luxury tax, aprons and trades

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Trade rumours in the NBA are full of terms like cap space, the tax, the second apron and salary matching. They all come from the collective bargaining agreement between the league and the players' union. You do not need to be an accountant to follow them. This guide explains the main ideas in plain terms. Exact dollar figures change every season because they are tied to league revenue, so check the official numbers for the current year.

A soft cap, not a hard one

The NBA has a salary cap, but it is a soft cap. Teams can go over it in many ways, mostly by re-signing their own players and by using set exceptions. What the cap mainly controls is how a team adds players from other teams.

Under the cap, a team has cap space and can sign free agents outright, or take on salary in a trade without sending much back.
Over the cap, a team can still re-sign its own players and use exceptions, but it cannot simply sign another team's free agent with space.

Bird rights

Named after Larry Bird, these rights let a team exceed the cap to re-sign its own players once they have been with the team long enough. This is why teams often go well over the cap: keeping your stars is allowed, signing someone else's is restricted.

Exceptions

Exceptions are permitted ways to add salary while over the cap. The best known is the mid-level exception, a set amount teams can use to sign free agents. There are different versions depending on how far over the cap a team is. Others include the minimum salary exception, which lets any team sign players to minimum contracts, and trade exceptions created when a team sends out more salary than it takes back.

The luxury tax

Above the cap sits the tax line. Teams whose payroll finishes above it pay a tax on every dollar over, at rates that rise in bands the further over they go. Repeat taxpayers pay higher rates. The money is distributed to non-tax teams, which is why owners watch the tax line closely.

The first and second aprons

The current agreement, which began in the 2023-24 season, added two further thresholds above the tax, called aprons. Rather than only costing money, crossing them removes team-building tools. Above the first apron, restrictions include:

Trade salary matching becomes stricter: a team can take back only a little more salary than it sends out.
Limits on acquiring a player through a sign-and-trade.
Limits on signing certain players released by other teams during the season.
A smaller mid-level exception.

Above the second apron, the limits are tougher still, including:

No mid-level exception at all.
No combining several players' salaries in a trade to bring in one bigger contract.
No taking back more salary than the team sends out.
No using cash in trades, and restrictions on trading certain future first-round picks.
Teams that stay above the second apron in several seasons can see a future first-round pick moved to the end of the round.

The idea is to make it very hard for the richest teams to keep stacking expensive stars indefinitely.

Trades and salary matching

Teams over the cap must roughly match salaries in a trade. That is why trades often include players nobody seems to want: they are there to make the numbers work. The more a team is over the cap and aprons, the tighter the matching rules. Other common limits include waiting periods before a newly signed player can be traded and rules on how many years of draft picks can be traded away.

Contracts in brief

Rookie scale contracts for first-round picks follow a set table.
Maximum contracts are capped as a percentage of the cap, rising with years of experience.
Supermax or designated veteran extensions allow larger deals for players who meet award criteria while with their team.
Two-way contracts let teams carry players who split time with the G League.

How to follow it as a fan

Find where your team sits: under the cap, over the cap, in the tax, or above an apron.
When a rumour appears, ask whether the salaries can match.
Watch the trade deadline and the summer, when most cap decisions happen.
Use the league's official releases for each season's figures rather than old articles.

What cap rule do you find most confusing, or which team do you think has handled the aprons best? Share your questions in the comments.