We are merely days away from crowning new NBA Champions and etching another season in the history books. You know what that means, right? Time for a fresh start, where all 30 teams head into the offseason aiming to either upgrade their roster to become title contenders or work towards a rebuild. But determining the best path forward for a franchise is no easy task. With sky-high player salaries, countless financial restrictions, and most importantly, luxury tax in play, the GMs and owners have their work cut out for the summer.
Let’s dive deeper to better understand these restrictions. Unlike the NFL, where salaries are hard capped and teams cannot exceed their payroll beyond a certain limit, the NBA chooses to have a soft salary cap. That means a cap exists, however there are ways to work around it and exceed the limit. But things get trickier as the amount increases. Enter luxury tax.
Obviously, without any restrictions, most multi-billionaire owners would not hesitate in spending whatever is needed to build a championship team. To stop that from happening, NBA introduced luxury tax, rewarding the teams that stay under a set limit while penalizing the ones that don’t. This season, the salary cap was $140.6 million, but the luxury tax threshold was $170.8 million.
Upon exceeding the threshold, teams are forced to pay a hefty fine, which is then distributed among the teams that stay under the limit. The fine increases significantly based on the amount they have exceeded it by. It can be anywhere from $1.5 to $5 per dollar. Moreover, the penalty is even stricter for ‘repeat offenders’ – teams that have exceeded luxury tax threshold in three of the past four seasons. In that case, it starts from $2.5 per dollar. That’s why most teams prefer to stay under the tax threshold unless they believe they could be legitimate title contenders. Thanks to the league’s new $76 billion media rights deal, the salary cap for next season is expected to rise by 10%.
That means:
Salary cap will shoot up from $140.6 million to $154.6 million.
Luxury tax threshold will increase from $170.8 million to $187.9 million.
Of course, the new projected limits will give teams more room to operate without having to pay a fine. But even with the 10% rise, for some franchises, that’s not enough. In that case, they further flirt with the first and second apron threshold, which comes with much harsher penalties.
What is NBA’s first apron and second apron threshold?
Well, certain front offices have no problem paying an additional fine if it promises their franchise a better future. That’s where the first and second apron penalties come in. Going beyond the luxury tax threshold, the league has a first apron in place, which for next season is projected to be $195.9 million. If teams exceed this threshold, they are forced to pay much more than just a hefty fine. The penalties include:
Inability to sign a player waived during the regular season if their salary exceeds the mid-level exception.
Any trade must match salaries within 110% of the outgoing ones.
Sign-and-trade players can only be acquired if it moves them below the apron.
As evident, this puts major restrictions on a team’s ability to make trades and upgrade their roster. However, there are a few franchises willing to pay this price for a shot at the title. As of now, Magic, Nuggets, and Knicks surpass the first apron.
Dec 28, 2024; Denver, Colorado, USA; Denver Nuggets center Nikola Jokic (15) reacts in the fourth quarter against the Detroit Pistons at Ball Arena. Mandatory Credit: Ron Chenoy-Imagn Images
Adding further restrictions on such teams, Adam Silver introduced the second apron threshold following the finalization of the new Collective Bargaining Agreement two years ago. For next season, the second apron threshold is projected to be $207.8 million. Here’s where the penalties get really harsh:
No access to taxpayer mid-level exception.
Inability to trade first round draft picks that are seven years in the future.
Inability to use trade exceptions while combining multiple players’ salaries.
No trade exceptions from the previous year.
Any upcoming first-round drafts move to the end of the round if teams exceed second apron in three seasons of a five-year span.
Sure enough, these restrictions would practically halt the growth of a franchise and maybe even haunt them for years. As of now, only three teams – Cavs, Celtics, and Suns fall in this dreaded category. So, you can expect a massive revamp this summer from all three teams, because no front office wants to face the harsh penalties of crossing the second apron.
Per veteran insider Shams Charania, “I think this offseason might be the craziest ever. Because I think what you have right now is — the parity of the league, it’s so thin right now. As far as the line of, you could win a championship, or you might be falling into the lottery.” The introduction of second apron could truly change the way the NBA operates. Of course, it would not have been possible if not for the new CBA.
What is the Collective Bargaining Agreement?
In simple terms, the CBA is a binding contract that helps the NBA, its teams, and players coexist peacefully. Per the National Basketball Players Association’s website, “The Collective Bargaining Agreement between the NBPA and the NBA sets out the terms and conditions of employment for all professional basketball players playing in the National Basketball Association, as well as the respective rights and obligations of the NBA Clubs, the NBA, and the NBPA.”
Well, the current agreement was finalized two years ago, coming into effect that very season. It will run through this entire decade, with both parties having the option to opt out following the 2028-29 season. It was the new CBA that introduced the second apron threshold and penalties. While most teams were worried about the new system, Adam Silver defended it, claiming that it helps level the playing field.
[US, Mexico, & Canada customers only] Jan 23, 2025; Paris, FRANCE; NBA commissioner Adam Silver speaks before the Paris Games 2025 NBA basketball game between the San Antonio Spurs and Indiana Pacers at Accor Arena. Mandatory Credit: Stephanie Lecocq/Reuters via Imagn Images“I think this new system, while I don’t want it to be boring, I want to put teams in a position, 30 teams, to better compete. I think we’re on our way to doing that… As long as we can create something close to a level playing field in terms of the tools available to teams to compete, I’m absolutely fine with dynasties and I’m fine with new teams emerging every year.” The Commissioner remarked.
Apart from the second apron, the new CBA also introduced the 65-game rule, where players need to play a minimum of 65 games to be eligible for regular season awards. The idea was to get rid of the rising load management problem. Even the in-season tournament was part of the agreement. Well, CBA is a way to ensure constant evolution of the NBA while keeping things fair for every party involved.
As of now, all 30 teams’ focus will be on strategizing for next season and hopefully, staying away from luxury tax. Especially the second apron penalties. Looks like its going to be an interesting summer in the NBA. Do you agree?
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