Kristian Ferrell
The NBA salary cap is the limit on the total amount of money that National Basketball Association (NBA) teams are allowed to pay their players. The NBA utilizes a soft cap system, which allows teams to exceed a predetermined threshold. Cap holds are a tool used by the NBA to ensure a fair playing field for free agents and to prevent teams from manipulating their cap sheet to act like they have more cap space than they do. The cap hold amount for a free agent is calculated based on the player's previous contract and can vary from 120% to 300% of the previous salary.
| Characteristics | Values |
|---|---|
| Purpose of Cap Holds | Prevent teams from using room under the cap to sign free agents before using Bird Rights to re-sign their own free agents |
| Cap Hold Calculation Factors | Number of years the player was under contract; Type of free agent (unrestricted/restricted); Nature of the player's most recent contract |
| Types of Cap Holds | Free agent cap holds; Rookie cap holds; Incomplete roster cap holds |
| Unrestricted Free Agent Cap Holds | Bird, Early Bird, Non-Bird, and Minimum Player |
| Restricted Free Agent Cap Hold | The greater of the free agent amount or the qualifying offer amount |
| First-Round Pick Coming Off Rookie Contract | 300% of previous salary if prior salary was below league average; 250% of previous salary if prior salary was above league average |
| Bird Player | 190% of previous salary (if below average) or 150% (if above average) |
| Early Bird Player | 130% of previous salary |
| Non-Bird Player | 120% of previous salary |
| Minimum-Salary Player | Two-year veteran's minimum salary, unless the free agent has one year of experience, then it's the one-year veteran's minimum |
| Two-Way Player | One-year veteran's minimum salary |
| Incomplete Roster Charges (2019/2020) | $897,158 per charge |
| Salary Cap for 2024-2025 Season | $140.588 million |
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What You'll Learn
Calculating a team's cap space
The NBA salary cap is the limit on the total amount of money that National Basketball Association (NBA) teams are allowed to pay their players. 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.
There are three basic kinds of cap holds: free agent cap holds, rookie cap holds, and incomplete roster cap holds. Most cap holds add money to a team’s cap sheet for players who are not under contract but are expected to be signed by the team in question due to an advantage it holds. This advantage is in the form of salary cap exceptions. Free agent exceptions (specifically the Bird, Early Bird, and Non-Bird Exceptions) and rookie exceptions give teams unique privileges to re-sign their own free agents or sign a draft pick. As such, free agent and rookie cap holds force teams to put “salaries” on their books as placeholders for expected deals.
The end of a free agent's contract does not remove him from a team's cap calculations. During the free agency period (from July 1 until the player signs with a team, or the free agent's former team renounces its rights), each free agent carries a specified salary cap charge for his last team, most often called a "cap hold". Normally, the cap hold can be no more than a player's maximum salary or less than his minimum salary, based on years of service. The only exception is for free agents who made the minimum salary in the previous season; if the league reimbursed the team for a portion of his salary in the last season of his contract, the reimbursement is not counted in the cap hold.
Veteran unrestricted free agents have four types of cap holds (Bird, Early Bird, Non-Bird, and Minimum Player) and they depend on the nature of the player’s most recent contract. Many of these cap holds are intrinsically linked to their corresponding exceptions. Rookie unrestricted free agents follow similar rules with slightly different results.
Teams can also make use of exceptions to increase their cap space. The Mid-Level exception allows teams to sign one or multiple free agents to contracts above the minimum salary even if they are above the cap. The Bi-Annual exception allows teams to sign a free agent to a contract above the minimum even if they are above the cap. This exception can be used only once every two years, and using it triggers a hard cap. Bird rights are another exception that allows teams to go above the salary cap in order to retain their own free agents up to a predetermined salary.
There are also mechanisms in place to waive players and stretch the money owed across twice the number of years remaining on their contract plus one. This lowers the player's cap figure accordingly and they become an unrestricted free agent once they clear waivers.
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Types of cap holds
Cap holds are a tool used by the NBA to ensure a level playing field for free agents and to prevent teams from manipulating their cap sheet to make it seem like they have more cap space. There are three basic kinds of cap holds: free agent cap holds, rookie cap holds, and incomplete roster cap holds.
Free Agent Cap Holds
Free agent cap holds are the most common type of cap hold. They are an amount of money that is charged to a team's salary cap number, even though the player is not under contract. This is to prevent a loophole that would allow a team to have its entire roster become free agents at the same time, allowing them to use their entire cap to sign other teams' free agents and then use Bird rights to re-sign their own players. Free agent cap holds force teams to prioritise and better manage their roster.
Draft Pick Cap Holds
Draft pick cap holds apply specifically to first-round draft picks. Second-round draft picks do not have them. This type of cap hold was introduced in 1995 to prevent negotiations from reaching ridiculous levels, with first-round picks now having a set contract amount that they can sign for.
Incomplete Roster Cap Holds
Incomplete roster cap holds are not well documented, but they are likely related to the signing of free agents or draft picks to complete a roster.
Veteran unrestricted free agents have four types of cap holds: Bird, Early Bird, Non-Bird, and Minimum Player. These depend on the nature of the player's most recent contract. Rookie unrestricted free agents follow similar rules with slightly different results.
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Cap hold amounts
Cap holds are a tool used by the NBA to ensure a level playing field for free agents and to prevent teams from manipulating their cap sheet to make it seem like they have more cap space. They are a placeholder figure that a team's own free agent counts against their salary cap until they either sign a new contract or have their rights renounced.
There are three basic kinds of cap holds: free agent cap holds, rookie cap holds, and incomplete roster cap holds. Most cap holds add money to a team’s cap sheet for players who are not under contract but are expected to be signed by the team in question due to an advantage it holds. This advantage is in the form of salary cap exceptions. Free agent exceptions (Bird, Early Bird, and Non-Bird Exceptions) and rookie exceptions give teams unique privileges to re-sign their own free agents or sign a draft pick. As such, free agent and rookie cap holds force teams to put “salaries” on their books as placeholders for expected deals.
Veteran unrestricted free agents have four types of cap holds (Bird, Early Bird, Non-Bird, and Minimum Player) and they depend on the nature of the player’s most recent contract. Many of these cap holds are intrinsically linked to their corresponding exceptions. Rookie unrestricted free agents follow similar rules with slightly different results.
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. The salary cap is set on July 1st of each calendar year (under normal circumstances) based on the amount of ‘Basketball Related Income’ the league took in the prior season. The NBA uses a ‘soft’ cap system that allows teams to exceed a predetermined threshold. This system gives teams an outlet to sign extra players and retain free agents via ‘bird rights’ even if they are over that cap number.
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Salary cap exceptions
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. The NBA has a soft salary cap, meaning that teams can go above the salary cap but will be subject to reduced privileges in free agency.
There are several exceptions to the salary cap rule, including:
- Bird rights: A cap exception that allows teams to go above the salary cap to retain their own free agents up to a predetermined salary. The amount a team is allowed to pay depends on the player's previous salary and how many years they have been with the team without changing through free agency.
- Non-Bird rights: This applies to players who have not changed teams through free agency for only one season. Teams can offer up to 120% of the player's previous salary without using another exception.
- Bi-annual exception: This exception allows teams to sign a free agent to a contract above the minimum even if they are above the cap. It can only be used once every two years and triggers a hard cap.
- Mid-level exception: This exception allows teams to sign one or multiple free agents to contracts above the minimum salary even if they are above the cap. There are three types of mid-level exceptions, and teams can only use one of them, depending on their financial situation.
- Two-year veteran's minimum: When a team signs a player with two or more years of experience to a one-year contract, the team only pays the player the minimum for a second-year player, and the NBA reimburses the rest. This rule aims to minimize financial bias against older players.
- Base year compensation (BYC): BYC prevents teams from re-signing players to salaries specifically targeted to match other salaries in a trade. A BYC player's trade value is 50% of their new or previous salary, whichever is greater. It only applies when the team is over the salary cap and the player receives a raise greater than 20%.
- Amnesty clause: Only players signed before the 2011-12 season could be "amnestied," and this clause could be exercised during the seven days following the NBA's July moratorium on player transactions. This allowed a rival team to claim an amnestied player at a reduced salary, with the waiving team only paying the remaining balance.
These salary cap exceptions provide teams with flexibility in signing and retaining players while still operating within the framework of the NBA's salary cap system.
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Bird Rights
The NBA salary cap is the limit on the total amount of money that National Basketball Association (NBA) teams are allowed to pay their players. The salary cap is calculated as a percentage of the league's revenue from the previous season. The NBA has a soft salary cap, meaning teams can go above the salary cap but will be subjected to reduced privileges in free agency.
There are three types of Bird Rights: Non-Bird Rights, Early Bird Rights, and the full Bird exception. Non-Bird Rights apply to players who have not changed teams as a free agent for a single season. Teams can offer these players up to 120% of their previous salary without using another exception. The Early Bird exception is for players who have played two seasons with the same team. Teams can use this exception to re-sign their own player for either 175% of his salary from the previous season or 105% of the average player salary for the prior season if he played for the team in the prior two consecutive seasons. The full Bird exception allows teams to re-sign their own free agents up to the maximum salary.
The intent of the Bird exception is to prevent teams from re-signing players to salaries specifically targeted to match other salaries in a trade. A player's trade value as outgoing salary is 50% of his new salary or his previous salary, whichever is greater.
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Frequently asked questions
Cap holds are a tool used by the NBA to ensure the free agent playing field is fair and prevent teams from manipulating their cap sheet to act like they have more cap space than they do.
Cap holds act as placeholders on each team’s cap sheet to indicate upcoming free agents or draft picks. Cap holds are put in place to prevent teams from having room under the cap to sign free agents before using Bird Rights on their own free agents.
The amount of a free agent’s cap hold is determined by how that player was signed under his previous contract. The cap hold can be as high as 300% of the previous salary for first-round picks coming off of their rookie deals, to as low as a one-year veteran’s minimum salary for players on a minimum deal.
There are three basic kinds of cap holds: free agent cap holds, rookie cap holds, and incomplete roster cap holds.
