NBA
NBA free agency 2023: What is the mid-level exception, and how much is it worth?
Some terms we don’t usually hear during the season start appearing in free agency. The most relevant this year would be the mid-level exception.
This week marks the start of NBA free agency, giving players without contracts the chance to switch teams. However, the process of acquiring new players is complicated, especially when it comes to the salary cap. Unlike other sports with a strict limit, the NBA has a soft cap, making it more complex.
What is the mid-level exception?
Teams can utilize the mid-level exception to secure their desired player without endangering their salary cap. This exception allows franchisees to strengthen their roster without incurring financial strain.
Luxury Tax
The NBA employs a “soft tax” system that permits teams to go beyond the salary cap, but they must pay a fee (referred to as luxury tax) for doing so. This luxury tax isn’t a one-to-one arrangement where teams deliver every cent they exceed the cap. Instead, the team will pay a more significant amount of luxury tax dollars than what they are over the cap, and if they are repeat offenders, they will have to pay additional dollars.
The NBA’s mid-level exception is a helpful tool that allows teams to sign players without exceeding their salary cap or luxury tax. This enables teams to remain competitive on the court while being financially responsible. Additionally, the creation of the mid-level was intended to encourage players to stay with their current teams by allowing teams to use it on an existing player while still improving their depth. It’s crucial to have valuable players on your team to stay competitive throughout the season and avoid injuries during the Playoffs. Mid-level exceptions are a great way to acquire high-value players without breaking the bank. The contract for a mid-level exception can span up to four years for teams above the cap and two years for teams below it.
When you are over the limit and want to look for an important contract, the mid-level exception comes into play with the following rules.
- Teams that are above the salary limit: They have the full mid-level available. These teams can offer a contract of up to four years, with a maximum salary of 12.4 million in the first season and annual increases of 5%.
- Teams that are above the luxury tax: They have the mid-level taxpayer available. These teams can offer a contract of up to three years, with a maximum salary of 5 million in the first season and annual increases of 5%.
- The teams that are below the salary limit: They have at their disposal the so-called room exception. These teams can offer a contract of only two years, with a maximum salary of 7.7 million in the first season and annual increases of 5%.
There are limited options for offering contracts over 7.7 million, which include the taxpayer and the room exception. However, the complete mid-level option, which allows for exceeding 12 million along with a four-year offer, provides an opportunity to acquire quality players. Teams commonly use this option to attract players willing to sign for a few million less to join a quality team, whether they are role players or higher-level veterans.
It is important to note that teams have the option of distributing their mid-level, meaning they can sign multiple players for smaller amounts as long as the total does not exceed the cap. For instance, if the cap is 12.4 million, a team can sign three players for 4 million each or any other combination that does not exceed the total.