The salary cap is the maximum a team can spend on player contracts in a league year. It is the same figure for every team, and unlike some other leagues, it cannot be exceeded.
Where the Number Comes From
The cap is tied to league revenue. Under the collective bargaining agreement, players receive a negotiated share of defined revenue categories, and the cap is that pool divided among the 32 clubs. When revenue rises, the cap rises, which is why it has climbed steadily as television deals have grown.
The figure is announced in the spring, before the league year opens, so teams can plan free agency around it.
A Hard Cap
| League | Type |
|---|---|
| NFL | Hard cap. No exceeding it, no luxury tax. |
| NBA | Soft cap with exceptions and a luxury tax |
| MLB | No cap, only a competitive balance tax |
An NFL team must be under the cap when the league year begins and must stay compliant throughout. There is no mechanism to pay a penalty and spend more.
What Counts Against It
Base salaries, prorated signing bonuses, roster bonuses, workout bonuses, likely-to-be-earned incentives, and dead money from players no longer on the roster. Practice squad salaries count too.
What does not count: money already paid in previous years, and incentives judged unlikely to be earned based on the prior season’s production, though those are reconciled afterward.
Carryover
Unused cap space rolls forward. A team that finishes a year $10 million under can add that to the following year’s limit, which is why some clubs deliberately bank room.
The Floor
There is also a spending minimum. Teams must spend a defined percentage of the cap in cash across each four-year period, which prevents a franchise from pocketing the difference indefinitely.
Related
How the cap works in practice · Dead cap explained · The franchise tag
The Bottom Line
A hard spending limit, identical for all 32 teams, set as a share of league revenue. Unused space carries over, and there is a floor as well as a ceiling.