NBA Payroll Expert Outlines First and Second Luxury Tax Thresholds with Conditions

Recently, renowned NBA salary cap expert Bobby Marks detailed the league’s first and second luxury tax thresholds.

First Luxury Tax Threshold, for teams with a payroll over $178.7 million:

1. No sign-and-trade transactions allowed
2. Previous trade exceptions cannot be used
3. No cash acquisitions in trades
4. Cannot sign a waived player with a previous salary above $12.9 million midseason
5. Teams can use trade exceptions generated in a transaction
6. Only the $5.2 million taxpayer mid-level exception is available

If a team violates these rules, they automatically trigger the second luxury tax threshold.

Second Luxury Tax Threshold, for teams with a payroll over $189.5 million:

In addition to the four restrictions from the first threshold,

1. Cannot aggregate existing contracts in trades (e.g., can’t trade $25M + $20M players for a $45M player)
2. No cash can be sent in trades
3. Free agents on the roster cannot be sign-and-traded if the team is above the second luxury tax line
4. Trade exceptions acquired via sign-and-trade cannot be used
5. Can use new trade exceptions acquired
6. If a team exceeds the second luxury tax threshold in 2024-25, their 2032 first-round pick will be hard-capped.

Teams currently at the First Luxury Tax Threshold: Hawks, Lakers, Grizzlies, Heat, Knicks, Trail Blazers

Teams at the Second Luxury Tax Threshold: Celtics, Nuggets (Pope contract situation), Bucks, Timberwolves (Leigh, Morris, McLaughlin contract issues), Clippers (Harden, George contract situations), Suns (Bill’s max deal with a no-trade clause)

Wildcard Teams: Warriors (Thompson’s contract situation and Paul’s guaranteed contract – if Thompson signs a large extension and Paul’s $30M final year is exercised, Golden State would be in the second luxury tax tier)

Notable Teams to Watch: Thunder, Pistons, Nets, Jazz, Wizards, among others with numerous young players (rookie-scale contracts) that provide cost advantages.