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How does the new NBA collective bargaining agreement affect the luxury tax?

NBA teams are trying to avoid the second apron, which is $17.5 million above the luxury tax (currently set at $165 million for next season).

MIAMI, FLORIDA - JUNE 09: Bam Adebayo #13 of the Miami Heat brings the ball up the court during the third quarter against the Denver Nuggets in Game Four of the 2023 NBA Finals at Kaseya Center on June 09, 2023 in Miami, Florida. NOTE TO USER: User expressly acknowledges and agrees that, by downloading and or using this photograph, User is consenting to the terms and conditions of the Getty Images License Agreement.   Mike Ehrmann/Getty Images/AFP (Photo by Mike Ehrmann / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)

The NBA’s new collective bargaining agreement (CBA) has introduced a second apron that has been designed to make penalties more punitive for teams that spend above the luxury tax.

NBA salary cap, luxury tax, first apron and second apron in 2023-24

Salary cap: $136 million

Luxury tax: $165 million

First apron: $172 million

Second apron: $182.5 million

The salary cap ( $136 million) is the amount of money that each team has available to spend on their roster. When a team spends below the cap, they create space so they can then spend on free agents.

Teams are trying to avoid the second apron, which is $17.5 million above the luxury tax (currently set at $165 million for next season).

Previously, teams would only have additional fiscal responsibilities owed if they crossed into the luxury tax threshold. However, soon teams will also have on-court consequences for spending more than other teams.

Teams can go over the $136 million salary cap but try to stay under the $165 million luxury tax line, as that is when the penalties kick in.

Penalties for teams

Financial fines can be handed out. These are given to the non-taxpaying teams at the end of the year. The further teams go into the tax, the get closer to the apron where roster-building penalties are added in.

Penalties for the first apron

The first apron kicks in when a team’s payroll is over $172 million, and the following restrictions are triggered:

  • Teams cannot acquire a player in a sign-and-trade if that player keeps them above the apron
  • Salary matching in trades must be within 110 percent, rather than 125 percent for teams not above the apron
  • Teams cannot sign a player waived during the regular season whose salary was over the $12.2 million midlevel exception

Penalties for the second apron

The penalties for the first apron apply to the second apron, which is triggered when a team’s salary is over $182.5 million. In 2023-24 one additional penalty is added when crossing the second apron: teams will have access to the $5 million taxpayer midlevel exception

At the end of the 2023-24 season, more restrictions will be added to the second apron.

The restrictions are as follows:

  • Teams cannot include cash in a trade
  • First-round picks seven years out are frozen (unable to be traded)
  • Teams cannot use a trade exception generated by aggregating the salaries of multiple players
  • Teams cannot use a trade exception generated in a prior year
  • A team’s first-round pick is moved to the end of the first round if they remain in the second apron for three out of five seasons

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