The NBA salary cap is the limit to the total amount of money that National Basketball Association (NBA) teams are allowed to pay their players. Like the other major professional sports leagues in North America, the NBA has a salary cap to control costs and benefit parity, defined by the league's collective bargaining agreement (CBA). This limit is subject to a complex system of rules and exceptions and is calculated as a percentage of the league's revenue from the previous season. Under the CBA ratified in July 2017, the cap will continue to vary in future seasons based on league revenues. For the 2025–26 season, the cap is set at $154.647 million.
Half of major American leagues (NFL, NHL) have hard caps while the NBA and MLB have soft salary caps. Hard salary caps forbid teams from going above the salary cap. Soft salary caps allow teams to go above the salary cap, but will subject such teams to reduced privileges in free agency. Teams that go above the luxury tax cap are subject to the luxury tax (a tax on every dollar spent over the luxury tax cap).
History The NBA had a salary cap in the mid-1940s, but it was abolished after only one season. The league continued to operate without such a cap until the 1984–85 season, when one was instituted in an attempt to level the playing field among all of the NBA's teams and ensure competitive balance for the League in the future. Before the cap was reinstated, teams could spend whatever amount of money they wanted on players, but in the first season under the new cap, they were each limited to $4.6 million in total payroll.
Under the 2005 CBA, salaries were capped at 57 percent of basketball-related income (BRI) and lasted for six years until June 30, 2011. The next CBA, which took effect in 2011, set the cap at 51.2 percent of BRI in 2011–12, with a 49-to-51 band in subsequent years.
To ensure the players get their share of the BRI, teams are required to spend 90 percent of the salary cap each year. The salary cap for the 2022–23 season is $123.655 million (minimum team salary, which is set at 90 percent of the Salary Cap, is $111.290 million). The league's newest CBA, which took effect with the 2023–24 season, requires teams to meet the 90% salary floor at the start of preseason training camp.
In December 2016, the league and the players' union reached a tentative agreement on a new CBA, with both sides ratifying it by the end of that month. This agreement was set to run through the 2023–24 season, with either side able to opt out after the 2022–23 season. The league and union reached agreement on a new CBA that took effect in 2023–24.
NBA Salary Cap in USD
NBA Salary Cap in 2025 USD (Converted using CPI data)
Soft versus hard caps Unlike the NFL and NHL, the NBA features a so-called soft cap, meaning that there are several significant exceptions that allow teams to exceed the salary cap to sign players. This is done to allow teams to keep their own players, which, in theory, fosters fan support in each individual city. By contrast, the NFL and NHL salary caps are considered hard, meaning that they offer relatively few (if any) circumstances under which teams can exceed the salary cap. The NBA and MLS version of the "soft" cap does, however, offer less leeway to teams than that of Major League Baseball. MLB allows teams to spend as much as they want on salary, but it penalizes them a percentage of the amount by which they exceed the soft cap. The percentage increases as the number of consecutive years a team exceeds the cap grows, resetting only when a team falls under the cap.
Luxury tax While the soft cap allows teams to exceed the salary cap indefinitely by re-signing their own players using the "Larry Bird" family of exceptions, there are consequences for exceeding the cap by large amounts. A luxury tax payment is required of teams whose payroll exceeds a certain tax level, which is calculated using a "piecewise" mathematical function, and teams exceeding it are punished by being forced to pay bracket-based amounts for each dollar by which their payroll exceeds the tax level.
While most NBA teams hold contracts valued in excess of the salary cap, few teams have payrolls at luxury tax levels. The tax threshold in 2005–06 was $61.7 million. In 2005–06, the New York Knicks' payroll was $124 million, putting them $74.5 million above the salary cap, and $62.3 million above the tax line, which Knicks owner James Dolan paid to the league. Tax revenues are normally redistributed evenly among non-tax-paying teams, so there is often a several-million-dollar incentive to owners not to pay the luxury tax.
The 2011 CBA instituted major changes to the luxury tax regime. The previous CBA had a dollar-for-dollar tax provision system, which remained in effect through the 2012–13 season. Teams exceeding the tax level were punished by being forced to pay one dollar to the league for each dollar by which their payroll exceeded the tax level. Starting in 2013–14, the tax changed to an incremental system. Under the current system, tax is assessed at different levels based on the amount that a team is over the luxury tax threshold. The scheme is not cumulative—each level of tax applies only to amounts over that level's threshold. For example, a team that is $8 million over the tax threshold will pay $1.50 for each of its first $5 million over the tax threshold, and $1.75 per dollar for the remaining $3 million. Starting in 2014–15, "repeat offenders", subject to additional penalties, are defined as teams that paid tax in previous seasons. In the first season, repeat offenders from in all previous three seasons paid a stiffer tax rate; from 2015 to 2016 thereafter, teams paying taxes in three out of four years are subject to the higher repeater rate. As in the previous CBA, the tax revenue is divided among teams with lower payrolls. However, under the new scheme, no more than 50% of the total tax revenue can go exclusively to teams that did not go over the cap. Initial reports did not specify the use of the remaining 50% under the 2011 CBA, but it was later confirmed that this amount would be used to fund revenue sharing for the season during which tax was paid.
For the 2013–14 season, the luxury tax threshold was set at $71.748 million. The Brooklyn Nets, whose payroll for that season was projected to be over $100 million, would face a luxury tax bill above $80 million, resulting in a total payroll cost of $186 million.
Tax levels from 2023–24 Amount over tax threshold Standard tax per excess dollar Repeat offender tax per excess dollar $5 million to $9,999,999 $1.75 $2.75 $10 million to $14,999,999 $2.50 $3.50 $15 million to $19,999,999 $3.25 $4.25 Over $20 million $3.75 + $0.50 per $5 million $4.75 + $0.50 per $5 million
The NBA's newest CBA, which took effect for the 2023–24 season, significantly changed the tax regime. First, the luxury tax brackets, which had been fixed amounts since 2013–14, now change each season by the same percentage as the salary cap. More significantly, a second tax "apron" has been introduced, which for 2023–24 was expected to be triggered at about $17.5 million over the tax line. Teams above the second apron face new restrictions on player movement, which will be discussed in later sections.
Exceptions Because the NBA's salary cap is a soft one, the NBA allows for several important scenarios in which a team can sign players even if their payroll exceeds the cap. The exceptions are as follows:
Mid-level exception Once a year, teams can use a mid-level exception (MLE) to sign a player to a contract for a specified maximum amount. The amount of the MLE and its duration depend on the team's cap status. In the 2017 CBA, the MLE was initially set at $8.406 million in the 2017–18 season for teams that are over the cap either before or after the signing, but under the luxury tax apron, set at $6 million above the tax line. Teams can use this exception to offer contracts of up to four years. Teams above the apron have an MLE initially set at $5.192 million, allowing contracts of up to three years. Teams with cap room, which were ineligible for the MLE before the 2011 CBA, have an MLE initially set at $4.328 million that allows two-year contracts. In subsequent seasons, all MLE amounts will be determined by applying the percentage change of the salary cap to the previous exception amount.
Before the 2011 CBA, the MLE was equal to the average NBA salary for all teams over the cap; teams with cap room were then ineligible for the MLE. The Mid-Level Exception for the 2008–09 NBA season was $5.585 million. The MLE was $5.854 million for the 2009–10 NBA regular season.
Under the 2017 CBA, the apron was initially set at $6 million above the tax line for the 2017–18 season. In a new feature, the apron changes from season to season, with the percentage change (up or down) set at half of the rate of change of the cap for that season.
The 2023 CBA introduces major changes to the MLE regime. As noted earlier, the 2023 CBA introduces a second tax apron, initially at about $17.5 million above the tax line for 2023–24. Use of the taxpayer MLE now makes the second apron a hard salary cap. Also, teams that are above the second apron cannot use the MLE to sign free agents; they also cannot sign free agents whose contracts have been bought out by their previous teams. The 2023 CBA also increases the non-taxpayer MLE by 7.5% from 2022–23, when the maximum starting salary on such a contract was $10.49 million. The cap room MLE, which had been $5.401 million in 2022–23, will increase by 30%, with its maximum contract length increased to three years.
Bi-annual exception The bi-annual exception can currently be used by teams below the apron to sign a free agent to a contract starting at $3.29 million. Like the mid-level exception, the bi-annual exception can also be split among more than one player, and can be used to sign players for up to two years; raises were originally limited to 8% per year, but in the 2017 CBA are limited to 5%. This exception was referred to as the "$1 million exception" in the 1999 CBA, although it was valued at $1 million for only the first year of the agreement.
An example of the bi-annual exception was the Los Angeles Lakers' signing of Karl Malone to a contract before the 2003–04 season.
The exception was eliminated for teams above the tax apron following the 2011 NBA lockout as many high spending teams were using this as a tool to gain top paid players.
A team cannot use this exception in consecutive years; a team that used it in 2016–17 (under the 2011 CBA) could not use it in 2017–18 (under the 2017 CBA). It also cannot be used by a team that has already used an MLE in the same season. Additionally, once a team uses the bi-annual exception, the tax apron (from 2023–24, the first apron) becomes a hard salary cap for the remainder of that season.
Rookie exception The NBA allows teams to sign their first-round draft choices to rookie "scale" contracts even if their payroll exceeds the cap.
Second-round pick exception The 2023 CBA created the second-round pick exception which allows teams to sign their second-round draft picks for up to four years without counting against the cap until July 31 of the player's first season.
The first second-round pick exception was executed by the Sacramento Kings when they signed No. 34 overall pick Colby Jones.
Two-way contracts