Explaining the NBA's Salary Cap, Luxury Tax, and First and Second Aprons

NBA fans will hear and read a lot about the league's second apron during the offseason, as it impacts a team's roster-building flexibility.

Here, we'll provide the key NBA team payroll thresholds and answer all the key questions about the salary cap, luxury tax, first and second aprons, from what they are to how they're activated and how they affect teams.

NBA payroll thresholds (2024/25 season)

Salary Cap floor	$126.5 million
Salary Cap limit	$140.5 million
Luxury Tax	$170 million
First Apron	$178 million
Second Apron	$188 million

NBA salary cap and luxury tax explained

The NBA salary cap is the maximum amount of money a team can spend on players without incurring any taxes, restrictions, or penalties. In 2024/25, it was $140.5 million.

The NBA's cap is a "soft cap," meaning teams can spend above the salary cap. That said, depending on how a team uses its salary cap, that team could become hard-capped — where the team cannot spend above a certain amount — if the first apron (we'll get to that soon) is activated.

Teams that spend above the luxury tax threshold (121.5 percent of the salary cap; $170 million in 2024/25) will have to pay a tax to the league. Money in the league's taxpayer pool gets distributed to all non-taxpaying teams.

A team that spends between $1 and $4,999,999 above the luxury tax line pays an additional $1.50 in taxes per payroll dollar spent above the tax threshold. Teams between $5 million and $10 million above the tax line have to pay a $1.75 tax per payroll dollar spent, and the tax per dollar continues to grow by 25 cents with each $5 million increment in payroll spent.

For a "repeat offender" — a team that has paid the luxury tax in three of the previous four seasons — the tax rate rises to $2.50 per dollar for teams between $1 and $4.99 million above the tax threshold and continues to rise by 25 cents with each $5 million increment.

In theory, there is no hard limit to how much a team can spend on salary if they follow the rules of the CBA. But, if a team spent $200 million on salary in 2024/25 when the tax line was $170 million, the owner would have to send a near-nine-figure sum straight to the league in taxes, which will naturally prevent most owners from spending that much season after season.

NBA first apron explained

The first apron has been around for longer than the second apron, and it can serve as a hard salary cap for teams that meet certain conditions.

Teams that spend around $6 million over the tax line can activate the first apron, depending on how they acquired players.

Teams are hard-capped at the first apron if they either acquire a player through a sign-and-trade, use the non-taxpayer mid-level exception to sign a player, or use the bi-annual exception to sign a player.

Each of these three methods can help a team spend deeper into luxury tax territory without incurring penalties, so the first apron gets activated in these cases in an effort to level the financial playing field.

A total of 16 teams were hard-capped under the first apron in 2024/25. The Dallas Mavericks were the highest-spending of those teams, as they ended the season with just $3,159 to spend before reaching the hard cap. They were capped because they used the non-taxpayer exception to sign Naji Marshall.

NBA second apron explained

The second apron is the new feature in the latest CBA, and it's where penalties get serious.

When teams spend $17.5 million over the tax line, the second apron is activated.

The second apron comes with a laundry list of restrictions: no taxpayer mid-level exception (which was worth $6.5 million in 2024/25) to use to sign free agents, no players can be acquired on the buyout market, no cash can be sent out in trades, no trading of first-round picks more than six years in the future, and no trades where the second apron team takes in more salary than it trades away.

If a team goes over the second apron in two seasons within a four-season span, their first-round pick will be moved to the end of the round in the ensuing NBA Draft.

Because acquiring players becomes so difficult once the second apron threshold is reached, second apron teams often have to fill out their roster with minimum contract players.

The 2024/25 Phoenix Suns are a prime example of this. Kevin Durant, Bradley Beal, and Devin Booker made a combined $150 million and the contracts of Grayson Allen and Royce O'Neale pushed the team into the luxury tax, so Phoenix had seven players on veteran minimum or rookie contracts.

The Suns had the most expensive roster in the NBA that season with a $214 million payroll — and a $152 million tax bill — but missed the playoffs, proving that spending deep into the luxury tax does not automatically equal success.

Spending nearly $44 million above the threshold meant they had to pay $3.50 per dollar spent above the threshold, which led to the $152 million tax bill.

Now, in the 2025 offseason, they have the task of trying to dump salaries and get out of the second apron so they can truly rebuild the roster.

Salary cap and luxury tax figures courtesy of Spotrac. CBA details courtesy of Larry Coon at CBA FAQ and the CBA document via the NBA Players Association website.