The “Soft Cap” Explained

Each Season, the Salary Cap is a threshold based upon Basketball Related Income (BRI) from the prior Season. To review the details of how it is set, visit the Finances section of the Guide, here.

Team Salary is used to determine if a Team is above or below the Salary Cap. Teams may not exceed the Salary Cap, unless the Team uses an Exception (discussed below) to do so.

This is called a “Soft Cap” system because while there is a Salary Cap, Teams are permitted to exceed the Salary Cap, and the majority of Teams do so on a year-to-year basis.

Exceptions – General Rules

Availability of Exceptions

To trigger an Exception, a Team must have Team Salary either (i) at/above the Salary Cap or (ii) under the Salary Cap for less than the Exceptions.

Non-Aggregation

A Team cannot combine multiple Exceptions to acquire a Player over the Salary Cap.

If more than one Exception is available to acquire a Player, then Team can choose which one to use. The choice will depend on (i) preserving the more valuable Exception for future use, or (ii) avoiding a hard cap.

Proration of Exceptions

General Rule

Most Exceptions hold full value until January 10th, at which point they begin reducing in value on a prorated daily basis. There are three Exceptions that have different rules:

1. Minimum Exception – Prorates from the start of the Season;
2. DPE – Does not prorate;
3. TPE‘s – Do not prorate.

Trades and Offer Sheets

If a Team is using an Exception to acquire a Player via Trade or to sign a Player to an Offer Sheet, than the full value of the Exception is still available.

Salary Cap Exceptions

The available Salary Cap Exceptions are:

1. Bird Rights;
2. Non-Taxpayer Midlevel Exception (NTMLE);
3. Taxpayer Midlevel Exception (TMLE);
4. Room MLE;
5. Bi-Annual Exception (BAE);
6. Disabled Player Exception (DPE);
7. Second Round Pick Exception;
8. Rookie Scale Exception;
9. Minimum Exception;
10. Traded Player Exception (TPE);
11. Existing Contracts;
12. Reinstatement;
13. Terminated Rookie Scale Contract.

Bird Rights

Summary of Bird Rights

Bird Rights allow a Team to re-sign a Player over the Salary Cap if he completed his most recent Contract with the Team.

There are three types of Bird Rights depending on how long the Player has been with the Team: Non-Bird, Early Bird, and Full Bird.

Below is a summary of the rights a Team has to sign the Player over the Salary Cap based upon those rights:

Accruing Bird Rights

To accrue Bird Rights, the Player must (i) be a Veteran Player, (ii) who is a Free Agent, (iii) who completed a Player Contract other than a 10-Day Contract (which can include a Two-Way Contract) with their Prior Team.

1. Non-Bird – Satisfies elements above but did not play more than 1 Season with Prior Team.
2. Early bird – (i) Played some or all of two preceding Seasons with Prior Team, (ii) had changed teams by Trade or Waiver Claim during the first two Seasons, or (iii) signed with his Prior Team during the first of the two Seasons.
3. Full Bird – (i) Played some or all of three preceding Seasons with Prior Team, (ii) had changed teams by Trade or Waiver Claim during the first three Seasons, or (iii) signed with his Prior Team during the first of the three Seasons.

The “Bird Clock” – Completing a Contract

As stated above, the Player must have completed his Contract with the Prior Team, meaning he must not have been waived.

However, this rule only applies to his most recent Contract. If he was waived during prior Contracts, you count the accrued Season and you do not reset the Bird Clock.

1. Waived during most recent Contract – Bird Clock resets;
2. Waived during prior Contract – Bird Rights continue to accrue.

Renouncing Bird Rights

Renouncing Bird Rights doesn’t automatically reset the Bird Clock. What it does is relinquishes the Team’s ability to use Bird Rights to resign the Player.

• If the Team still signs the Player using Room or a Minimum Exception then the Bird Clock continues to accrue.

A Team can also “renounce down” from Early Bird Rights to Non-Bird Rights. This would allow the Team to sign the Player avoiding the 2-Year minimum length of an Early Bird Contract.

Trades/Waivers and Bird Rights

If a Player is Traded or Waived, then the Bird Rights typically transfer to the Team acquiring the Player, subject to the following exceptions:

1. Waivers – To retain Full Bird Rights he must have been claimed in the first of the three seasons counted toward the Bird Rights.
2. Traded – Bird Rights reset to Non-Bird Rights if the Contract (i) is not a Two-Way Contract, (ii) is a 1-Year Contract (excluding Option Year), and (iii) the Player would have Full Bird or Early Bird Rights after the completion of the 1 Year.
   • This is why there is an Automatic No Trade Clause for such Contract.

Non-Taxpayer Mid-Level Exception

The Non-Taxpayer Mid-Level Exception (NTMLE) is available to Team’s below the First Apron to sign or acquire a Player or Players for up to $14,104,000 (2025-26).

NTMLE Availability

1. Arises on first day of Salary Cap Year and expires on last day of Regular Season;
2. Apron Salary must be below the First Apron (i.e. has nothing to do with being a Taxpayer. Name is from the old rules);
3. Team must not have used the Room MLE;
4. Can be used for Signing, Trade or Waiver claim;
5. Can use the NTMLE to match an Offer Sheet;
6. Can split the NTMLE into multiple Contracts;
7. Once used, the Team is hard capped at the First Apron;
   • Exception – If the Team uses the NTMLE to sign a Player or Players to terms that would satisfy thre TMLE, then the Team can exceed the First Apron and the signings will be treated as TMLE signings rather than NTMLE.

NTMLE Contract Limitations

1. Salary/Unlikely Bonuses cannot exceed 9.12% of Cap ($14,104,000 for 2025-26);
2. Length cannot exceed 4 Seasons;
3. Increase/Decrease limits up to 5%.

Taxpayer Mid-Level Exception

The Taxpayer Mid-Level Exception (TMLE) is for Team’s below the Second Apron to sign a Player or Players for up to $5,685,000 (2025-26).

TMLE Availability

1. Arises on first day of Salary Cap Year and expires on last day of Regular Season;
2. Apron Salary must be below the Second Apron (i.e. has nothing to do with being a Taxpayer. Name is from the old rules);
3. Team must not have used the Room MLE or the NTMLE exceeding the Contract terms of the TMLE;
4. Can only be used for a signing;
5. Can split the TMLE into multiple Contracts;
6. Once used, the Team is hard capped at the Second Apron.

TMLE Contract Limitations

1. Salary/Unlikely Bonuses up to $5,585,000 (2025-26, rising in line with the Cap);
2. Length cannot exceed 2 Seasons;
3. Increases/decreases up to 5%.

Roster-Building Limitations

If the Team uses the TMLE, then the Team is essentially saying its operating over the First Apron. As a result, the TMLE operates as its own hard cap, restricting the following transactions for the rest of the Salary Cap Year:

1. Bi-Annual Exception;
2. NTMLE;
3. Acquire Player via Sign-and-Trade;
4. Sign Player in Regular Seasons whose waived salary exceeds NTMLE amount;
5. Acquire Player using Expanded TPE;
6. Using Standard TPE after Regular Season (if it arose during Regular Season) or after subsequent Regular Season (if it arose during the Offseason).

Room MLE

The Room MLE is available when Team’s start under the Salary Cap and then seek to sign or acquire a Player or Players over the Salary Cap for up to $8,781,000 (2025-26).

Room MLE Availability

1. Arises at the start of the Salary Cap Year (or when the elements above are met) and expires at the end of trhe Regular Season;
2. Team Salary below the Salary Cap restricting use of BAE, NTMLE and TMLE;
3. Team has not used the BAE, NTMLE or TMLE;
4. Can acquire Player or Players via Signing, Trade or Waiver Claim;
5. Can split the Room MLE into multiple Contracts.

Room MLE Contract Limitations

1. Salary/Unlikely Bonuses up to $8,781,000 (5.678% of the Salary Cap);
2. Length cannot exceed 3 Seasons;
3. Incease/decreases up to 5%.

Room MLE Roster-Building Limitations

Once used, the following Exceptions are prohibited:

1. NTMLE;
2. TMLE;
3. BAE.

Bi-Annual Exception

The Bi-Annual Exception (BAE) is available to Teams under the First Apron to sign or acquire a Player or Players over the Salary Cap for up to $5,134,000 (2025-26). It’s Bi-Annual because it’s only available if the Team did not use it in the prior Salary Cap Year.

BAE Availability

1. Arises at the start of the Salary Cap Year (or when the elements above are met) and expires at the end of trhe Regular Season;
2. Apron Salary must be below the First Apron;
3. Team has not used the Room MLE in the same Salary Cap Year or the BAE in two consecutive Salary Cap Years;
4. Can acquire Player or Players via Signing, Trade or Waiver Claim;
5. Can split the BAE into multiple Contracts.

BAE Contract Limitations

1. Salary/Unlikely Bonuses up to $5,134,000 (3.32% of the Salary Cap);
2. Length cannot exceed 2 Seasons;
3. Incease/decreases up to 5%.

Disabled Player Exception

The Disabled Player Exceptions (DPE) gives a Team a new Exception to sign or acquire a Player when one of its existing Players is injured for the entire Season.

DPE Process

1. Team requests DPE from League between July 1st and January 15th;
2. League grants DPE based on whether the injured Player is deemed “substantially more likely than not” to return by June 15th by a physician;
3. If granted, the Team has until March 10th to acquire a Player using a DPE, and the DPE Amount (discussed below) is added to Team Salary);
4. Player can still return if DPE is granted, but the DPE will be extinguished if it is not used before his return.

Using DPE

1. Amount – The DPE is for the lesser of (i) fifty percent (50%) of the disabled player’s current Salary for the current year or (ii) an amount equal to the NTMLE amount for the current year.
2. Method – The Team can acquire a player using the DPE either by signing a new player to a 1-year deal or acquiring a player via Trade or Waiver who only has one year left on his contract (not to exceed the Salary amount above).

Second Round Pick Exception

The Second Round Pick Exception allows Teams to sign their Second Round Picks over the Salary Cap without the need to exhaust another Exception, subject to the Contract terms available below.

Contract Terms

1. Length – Must be for (i) 2 Seasons with a Team Option in the 3rd Year, or (ii) 3 Seasons with a Team Option in the 4th Year;
2. Salary – The Salary amount depends on Contract length.
   • If 2 Seasons plus Option:
     • First Year: Salary/Unlikely Bonuses up to Minimum Salary for 1 YOS;
     • Remaining Years: Applicable Minimum Salary.
   • If 3 Seasons plus Option:
     • First Year: Salary/Unlikely Bonuses up to Minimum Salary for 2 YOS;
     • Second Year: Salary/Unlikely Bonuses up to Minimum Salary for “Year 2” of Minimum Salary for 2 YOS;
     • Remaining Years: Applicable Minimum Salaries.

Contract Summary

Below is a summary of what a Team can offer a Second Round Pick using this Exception, depending on the length of the Contract. The chart is the Minimum Salary Scale for 2025-26.

Team Salary

A Contract signed using the Second Round Pick Exception is not counted toward Team Salary until July 31st.

Rookie Scale Exception

The Rookie Scale Exception allows a Team to sign its First Round Picks to their Rookie Scale Contracts over the Salary Cap.

Minimum Exception

The Minimum Exception allows a Team to sign a Player to a Minimum Contract over the Salary Cap.

The Contract must not exceed 2 Seasons in length and must be for the applicable Minimum Salary in each Season, with no Bonuses of any kind.

Traded Player Exception

Visit the Traded Player Exception page in the Trades portion of the Guide.

Existing Contracts

A Team can exceed the Salary Cap to retain is previously existing Contracts.

Reinstatement

If a Player is banned by the NBA and subsequently reinstated, the team can exceed the Salary Cap to resign the Player, limited to 5% raises.

Terminated Rookie Scale Contract

If a Player is (i) a Veteran Free Agent (ii) his Free Agency is because his Team did not exercise the 3rd or 4th Team Option of his Rookie Scale Contract, then his Prior Team can sign him over the Salary Cap for up to what he would have earned in the applicable Option Year.

Increases/decreases are limited to 5%.