What is the Second Apron? NBA Salary Cap Explained

Just ask Lance Stephenson: money talks.

The Phoenix Suns are frequently discussed as a team with no options to upgrade or even make changes at the fringes of their roster due to the second apron. Likewise, there is constant hand-wringing nowadays over how the Boston Celtics won't be able to keep their core together without massive luxury tax penalty payments. But what are all these different levels of team salary spending, and what do they really mean?

Salary Floor

Before we get to teams being penalized for spending too much, let's talk about the minimum they need to spend. This is the Salary Floor (or the Minimum Team Salary in Capese), 90% of the salary cap. This was set at $126.5 million for the 2024-2025 season. There are two penalties that come from a team not meeting this threshold in spending:

1. The team needs to send a payment to the NBA with the difference between their actual salary and the Salary Floor. This is done because the Collective Bargaining Agreement (CBA) sets the revenue split between players and team governors. Without this floor, there could be teams cheaping out during down years while they chase high lottery picks, starting players with randomly generated 2K names like JaKarr Sampson.
2. The team cannot receive any distributions of luxury tax payments from other teams (more on this later). There's no explicit motivation named for this in the CBA, but we can assume it's to force teams to put together an at least somewhat competitive roster even in tanking years.

Salary Cap

The salary cap determines the amount of cap space (or lack of) a team has. It is set at 44.74% of the Projected Basketball Related Income (BRI) for a given year. Cap space is useful because it's an unrestricted way to sign free agents or take in salary in a trade. Teams are often over the cap and have to use exceptions (a whole other topic) to sign free agents or need to follow certain rules around how much salary they can take in. Teams under the cap have no such issue.

Over the Cap but Below the Tax

This isn't a formally described zone in the CBA, but I feel that it's worth mentioning. When teams' salary totals are in this range, they don't face any financial penalties but can only sign free agents using exceptions. They can still re-sign their own players with Bird rights or Early Bird rights. And when doing trades, they must match salaries within 125% + $100K (for salaries under ~$7.5M) or 125% for larger contracts.

Tax Level

Next we have the tax level, where teams first start to get penalized for their spending. It is set at 121.5% of the Salary Cap. Under the current CBA, teams face a progressive tax system with different brackets, much like how everyday people pay higher taxes on their income that exceeds a certain amount. Below we'll reference a Tax Bracket Amount. This is determined to be:

Tax Bracket Amount = $5 million × (Salary Cap for 2023-24 / Salary Cap for that year)

First Apron

An interesting thing about the aprons is that they represent a threshold above which you lose the ability to do certain things, but also a hard cap that is set for your team's salary if you perform those actions. When you go above the apron, you cannot:

• Use the Bi-Annual Exception (a small exception for mid-level players) or Non-Taxpayer Mid-Level Exception
• Do sign-and-trade deals to bring in a player
• Take back more money in trades than you send out

If you do any of the above during a salary cap year (except for salary aggregation in a trade), then your team's spending must stay under the First Apron for that entire year.

Second Apron

Finally, the infamous second apron. All of the previous restrictions apply, as well as a few more:

• Can't use "Cash Considerations" in trades—no more buying second-round draft picks from cheap teams
• Can't carry over exceptions created in previous years
• When a team is over the second apron in 2 out of 4 years, their first-round draft pick in 7 years is moved to the end of the first round.

These extra restrictions make being above the second apron a huge downside for teams. Imagine going all in on being a contender for two years, failing to win a championship, and then having a sub-20 win season 7 years from now result in the 30th overall draft pick—yikes.

Conclusion

These progressively harsher restrictions were all intended to introduce a level of parity the league has never seen before. As we'll explore in a future post, the 2011 CBA started a trend of the NBA getting tougher and tougher on high-spending teams, particularly those in large markets. It remains to be seen if the intended effect of curbing the Warriors and Clippers' splurging will be worth the penalties to small-market teams who have tried to retain their championship rosters, like the Milwaukee Bucks and Denver Nuggets.

In the meantime, you can use our tool to compare contracts before and after the 2023 CBA, to see their value and if they're worth going through all these taxes and aprons.