How the NBA salary cap, luxury tax, and aprons actually work (2026 edition)

Published April 19, 2026 · By The Basketball Fans Editors

The NBA salary cap is the single most-consequential economic rule in the league. Every trade, every free-agent signing, every draft-night decision is filtered through its math. For most of the league’s modern history, the cap had one threshold. The 2023 Collective Bargaining Agreement replaced that single threshold with four distinct lines, each with increasingly severe penalties. A team that sits at $207.9 million in team salary in 2025–26 faces restrictions that a team at $154.7 million does not. Understanding the four lines is the entire cap system. Everything else is footnotes.

The four lines, 2025–26 season

The league’s collective bargaining agreement, agreed in April 2023 and effective 2023–24, replaced the prior single-apron system with this four-line structure. The 2023 CBA’s core design principle was to use the apron thresholds as de facto hard caps without legally calling them hard caps. The restrictions get progressively harsher, making it increasingly painful for a team to sit near or above them for multiple seasons.

The salary cap itself

The salary cap is set annually at 44.74 percent of Basketball-Related Income (BRI), a figure that includes television revenue, ticket revenue, merchandise revenue, and licensing, minus certain defined exclusions. For 2025–26 the cap was set on July 1, 2025 at $154.647 million, a 10 percent rise over the 2024–25 figure. The cap grows in a defined band of 3–10 percent annually, determined by the new national television contract (Disney/ESPN/NBC/Amazon, signed 2024 and effective 2025–26) which locked in a roughly doubled rights fee and, by consequence, a larger cap annually through 2034.

The cap is a soft cap, not a hard cap. Teams can exceed the $154.647 million figure using one of several pre-defined exceptions:

• Bird Rights (Larry Bird Exception): a team can re-sign its own players to salaries above the cap for up to five years. This is the mechanism that lets championship rosters stay together.
• Non-Taxpayer Mid-Level Exception (NTMLE): worth $14.1 million in 2025–26. A team below the first apron can use this to sign a free agent per year.
• Taxpayer Mid-Level Exception (TMLE): worth $5.6 million in 2025–26. Used by teams between the luxury tax and the first apron.
• Bi-Annual Exception (BAE): worth $5.1 million in 2025–26. Usable every other year by non-taxpaying teams.
• Minimum Veteran Exception: any team can sign a veteran free agent to the minimum regardless of cap status.

These exceptions are why teams rarely have exactly $154.647 million in team salary. Most contending teams operate above the cap via Bird Rights, which is legal as long as they stay under whatever apron threshold they want to avoid.

The luxury tax

At $187.9 million in 2025–26 (121.5 percent of the cap), the luxury tax kicks in. Teams above this line pay a penalty tax on each dollar over the threshold. The tax is progressive:

• First $5M over: $1.50 per $1 over
• $5M–$10M over: $1.75 per $1
• $10M–$15M over: $2.50 per $1
• $15M–$20M over: $3.25 per $1
• Above $20M over: $3.75 per $1 plus an additional $0.50 for every $5M band

Teams that pay the tax in four of any five consecutive years hit the “repeater tax,” which adds roughly $1.00 per $1 to each band.

The tax money is pooled. Half goes to the league office. Half is distributed evenly among all non-taxpaying teams. This means a small-market team that stays below the tax gets a check from the league, roughly $5–10 million a year, depending on how aggressive the tax-paying teams are. The distribution is a material revenue stream for mid-market franchises.

The first apron

At $195.945 million in 2025–26, the first apron triggers the first set of roster-construction restrictions. A team above the first apron:

• Cannot use the Non-Taxpayer Mid-Level Exception (they can only use the smaller Taxpayer MLE).
• Cannot use the Bi-Annual Exception.
• Cannot acquire a player in a sign-and-trade transaction.
• Cannot trade for a player whose incoming salary, combined, exceeds the outgoing salaries by more than 110 percent (normally the limit is 125 percent).

These restrictions are meaningful but manageable. A team at the first apron can still compete, it just has narrower roster-flexibility options.

The second apron

At $207.824 million in 2025–26, the second apron is where the 2023 CBA’s teeth actually bite. A team above the second apron:

• Cannot use any form of the Mid-Level Exception at all.
• Cannot sign players from the buyout market whose salaries before the buyout exceeded the TMLE amount.
• Cannot aggregate two or more contracts in a single trade to acquire a higher-salaried player.
• Cannot send out cash in trades.
• Cannot trade their first-round draft pick that is more than seven years away, and that pick is frozen until they dip below the second apron for at least one year.
• Cannot take back more salary in a trade than they send out.
• Has their first-round draft pick moved to the back of the first round (30th overall) in any draft where the team finishes in the second apron for three of the preceding five seasons.

The most-consequential restriction is the draft-pick freeze. A team that stays above the second apron for multiple years loses the ability to rebuild through the draft because their future picks cannot be traded. The 2023 CBA specifically targeted the mid-2010s Brooklyn Nets/Boston Celtics draft-pick-trade dynamic by making the second apron too painful to sit in for long.

What the four lines mean in practice

Below cap: a team has full roster-construction flexibility plus the ability to sign a free agent to a max deal. Usually a rebuilding team or an early post-championship team resetting.

Cap to luxury tax: the normal operating zone for a competitive team using its Bird Rights and the full MLE. Most of the 30 teams live here.

Luxury tax to first apron: contender territory. The team is paying a modest tax, can still use the TMLE, and has full trade flexibility. This is where most championship teams operate.

First apron to second apron: high-cost contender territory. The team is restricted on one or two specific roster moves but can still build. Modern examples: the 2024–25 Boston Celtics, the 2024–25 Denver Nuggets.

Above second apron: heavily restricted. Usually only an option for a team with a short contention window and a willingness to accept draft-pick penalties for three-plus years out. Modern examples: the 2024–25 Phoenix Suns (before the KD trade), the 2023–24 Golden State Warriors. Both teams, notably, moved to reduce team salary specifically to dip below the second apron.

Why the 2023 CBA invented two aprons

The prior CBA (2017, expired 2023) had one apron. Teams built around multiple max contracts were increasingly willing to pay through that apron because the restrictions were tolerable. The mid-2010s Golden State Warriors and the late-2010s LA Clippers both operated far above the old apron for multiple years running. The league’s competitive-balance argument was that this produced long-running super-teams that competitive free-agent signings could not displace.

The 2023 CBA’s negotiators, NBPA executive director Tamika Tremaglio on one side and the league’s labor counsel on the other, specifically designed the two-apron structure to create a steeply progressive penalty curve that made sitting above the second apron genuinely painful. The first apron restricts tools. The second apron restricts roster-construction fundamentals. A team can choose to pay through the first apron. A team cannot plausibly pay through the second apron for three-plus consecutive years without losing its long-term flexibility.

The 2025 Kevin Durant trade to the Houston Rockets is the clearest real-world illustration. The Suns trading Durant was partially motivated by their need to dip below the second apron before the roster-freeze restrictions kicked in. The trade itself was structured across seven teams specifically to rebalance multiple teams’ salary positions relative to the apron thresholds.

What the cap grows to over the next decade

The new national TV contract signed in 2024 (with Disney, NBC, and Amazon) nearly doubled the league’s annual rights-fee revenue. BRI will correspondingly rise, and the cap will rise with it. Basketball-Reference’s projection, based on the 10 percent annual cap-growth mechanism built into the CBA, puts:

• 2026–27 cap: ~$170 million
• 2027–28 cap: ~$187 million
• 2028–29 cap: ~$206 million (at which point the 2025–26 first apron figure is below the future cap entirely)
• 2029–30 cap: ~$226 million

The four-line structure will remain but will scale upward. The $195.9 million first-apron figure in 2025–26 will be the salary-cap figure in roughly three years. Teams planning around the 2027 and 2028 free-agency cycles are already pricing in these projections.

Sources

Linked in the frontmatter. The 2023 CBA apron-structure summary is drawn from Larry Coon’s CBA FAQ, which is the de facto reference for professional front-office CBA interpretation. For general context on team-building and championship construction, The Book of Basketball (Ballantine, 2009) by Bill Simmons covers the front-office logic behind roster decisions. The 2025–26 specific figures are from the NBA’s July 1, 2025 cap announcement. The Phoenix Suns’ 2025 second-apron motivation for the KD trade is referenced in multiple post-trade pieces by ESPN’s Bobby Marks and The Athletic’s John Hollinger.

Gear

The essential cap-era reading.

*The Book of Basketball* by Bill Simmons (Ballantine, 2009) →

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