NBA Trade Deadline, Salary Caps & Luxury Tax Defined


Let the gossip and rumors begin…it’s officially the countdown to the NBA Trade Deadline. With the NBA All Star break wrapping up this weekend, viagra sale NBA players and fans will now wait for the official NBA Trade Deadline that falls this Thursday, view February 21st. If terms like “Trade Deadlines”, “Salary Caps” and “Luxury Tax” mean absolutely nothing to you, then read on to learn about these important rules and benchmarks that govern the NBA and make this time of year so exciting.

The process of trading and negotiating for players before the deadline is complex. The NBA has a ton of rules and regulations that teams are required to abide by – it’s not as easy as picking two players and swapping them out.  But, as an NBA fan, it’s something you need to be familiar with to understand the overall strategy and actions teams take this time of year. I’ve cut through all of the rules and details to deliver the most important details with some real life equivalents. Take a look…

Trade Deadline: 

Real World equivalent: Tax Return Deadline – you gotta file those taxes before April 17th

  • The NBA’s trade deadline falls on the 16th Thursday of the season (usually in February) at 3 PM ET. 
  • Trades made past the deadline date and time are absolutely forbidden.

moneySalary Cap: 

Real World Equivalent: Your credit limit

  • Is the maximum amount of money an NBA team can pay the players on their team as a whole. The value of the salary cap changes on a year-to-year basis. Each year this amount is calculated as a percentage of the league’s total revenue. 
  • However, the NBA has a soft cap that allows for a team to exceed that year’s salary cap to re-sign their own players and keep support of that particular city.
  • The amount of money a player can be signed for is determined on how many years they’ve been in the league. 6 years or under $9 million or 25% of cap, 7-9 years is $11 million or 30% of cap, and 10+ years is $14 million or 35% of the cap – they would choose whichever is greater.
  • *Derrick Rose Rule* is a big rookie exception. This rule added in 2011 says if a player coming off his rookie contract started in two NBA All-Star games, was named to an All-NBA team twice, or voted MVP they are eligible to sign for 30% of the cap.

luxury taxLuxury Tax: 

Real World Equivalent: This tax exists in the general economy, it’s usually applied to purchases that are considered ‘sin’ purchases such as liquor and tobacco but can also be applied to luxury cars and jewelry, items that are not a necessity. Many immediately think of the Monopoly board game where the “luxury tax” card has a sparkly diamond ring but you have to give $75 to the bank.

  • The Luxury Tax in the NBA is essentially a fine. If you break the rules by paying players more than the salary cap, there are consequences. When a NBA team’s payroll exceeds a certain “tax level” (determined by a very complicated and boring formula) they are charged a Luxury Tax. The luxury tax forces teams to pay one dollar to the league for every dollar their payroll exceeds the tax level.

Trading Rules: 

  • Teams under the salary cap can trade as they please, as long as their trades don’t exceed $100,000 above the cap.
  • Teams above the cap are in a much stickier situation. They can’t acquire more than 125% plus $100,000 of the salary they trade away. So basically they have to be REALLY careful in any trades that they make.
  • If a team signed a free agent in the offseason they have to wait 3 months or until December 15th of that year to trade them away.
  • If a team picks up a player in a trade, they are allowed to trade that player immediately for another individual player.
  • To sweeten the pot teams also include other tokens in the trade deals – usually appealing draft picks.
  • ESPN’s Trade Machine is a great way to see if any potential trades are possible. It’s quick and easy, you just plug and chug. It lets you know why your trade would be possible or not.


Biggest Bulls Trade Rumors: 

With the Bulls exceeding the salary cap it’s very unlikely that they’ll be making any serious additions before the trade deadline. If anything, they’ll be looking to lose someone to give themselves a little wiggle room within their salary cap. Nonetheless, there are still some possible trades circling around the rumor mill.

  • Orlando Magic Shooting Guard J.J. Redick for Bulls Shooting Guard Rip Hamilton. Redick has been linked to the Bulls before – in 2010 he signed an offer with the Bulls, but the Magic countered it. Confirmed by HoopsWorld’s Alex Kennedy.
    Orlando Magic v New York Knicks
  • Toronto Raptors’ Andrea Bargnani for Carlos Boozer – however it’s unlikely any team would be willing to take on Boozer’s hefty contract. The potential deal could also include Nate Robinson for past Bull’s point guard John Lucas III. Confirmed by Chicago Tribune’s KC Johnson. 

All we can do at this point is wait and see what rumors surface before Thursday and which actually pan out. Check back in next week for a re-cap on what went down and who went where.

About the author: B is for Bulls, Bears, Blackhawks and Brittany. Brittany Marques is a yoga-practicing Communications Data Analyst by day and a wine-drinking sports junkie by night. Born and raised in the Northwest Suburbs and a DePaul Journalism Alumnae, this Chicago girl loves nothing more than her Chi-town teams and deep dish pizza. Living amongst the “12th Man” as a transplant in Seattle can be tough, but Brittany’s Chicago roots hold true. She may now spend her weekends hiking the PNW, but she is always repping her hometown swag with pride. You can follow her on her social media properties.

Comments on this entry are closed.

back to top