NBA Trade Rules Explained: Salary Matching, TPEs, Draft Picks & CBA Guide

Every NBA team's ability to sign free agents and make trades is governed by where its payroll falls relative to a series of financial thresholds: the salary cap and the two aprons above it. Each tier unlocks different tools while imposing different restrictions. Teams under the salary cap can operate with the greatest flexibility, while teams above the second apron face the league's strictest limitations, including a prohibition on combining player salaries in trades. This guide explains what each payroll tier allows, what it restricts, and how a team's available roster-building tools change as its payroll moves up the ladder.

Salary levels and applicable rules are determined entirely by a team's post-transaction salary. Free agency rules and trade restrictions depend strictly on where the team's payroll will stand after the signing or trade is completed, not before.

Under the Cap

Teams operating beneath the salary cap enjoy maximum flexibility:

• Trades

  Teams can absorb incoming salary freely — no outgoing salary or matching is required — as long as the total payroll remains below the cap line.

• Free Agency

  Teams can freely sign free agents, provided the contract does not push the team over the salary cap threshold.

Example

Sitting under the cap with $10,623,465 in space, Brooklyn can take back salary up to that limit without sending out salary up in exchange.

Pre-trade salary $154,337,535 Cap space $10,623,465 Under the Cap

Pre-trade salary $192,348,473 First apron space $16,666,527 First Apron

Over the Cap (Above the Salary Cap, Below the Tax Line)

Once a team crosses the salary cap threshold, transaction rules become more structured.

• Trades

  Teams can no longer simply absorb salary — how much they take back is capped by how much they send out. The maximum incoming salary they're allowed depends on which outgoing salary bracket they fall into:

  • $7.5M or less: Incoming salary can be up to 200% of outgoing salary.
  • $7.5M to $29M: Incoming salary can equal outgoing salary plus $7.5M.
  • $29M or above: Incoming salary cannot exceed 125% of outgoing salary plus $125K.
• Free Agency

  Available: Bird Rights, Non-Taxpayer MLE, BAE, Veteran Minimums, or Two-Way Contracts.

  Not Available: Cap Space, Taxpayer MLE

  Once a team is over the cap, free agents can no longer be signed outright with cap space. Over-the-cap signings are limited to specific mechanisms: Bird Rights, the Non-Taxpayer Mid-Level Exception (MLE), the Bi-Annual Exception (BAE), Veteran Minimums, or Two-Way Contracts.

Luxury Tax Line

Sitting above the salary cap but below the first apron, the luxury tax line serves primarily as a financial penalty for high-spending teams.

• Impact on Transactions: It has a minimal impact on standard trades and general operations, with one key exception in free agency.
• Free Agency Exception: Teams lose access to the full Non-Taxpayer MLE, which is replaced by the smaller Taxpayer MLE.

Example

Brooklyn sends a $15M contract and receives a $20M player. Under the $7.5M–$29M salary bracket, they can absorb up to outgoing + $7.5M ($22.5M), so the $20M incoming salary clears easily. Milwaukee, at the first apron, can send out more than they receive — permitted since first-apron rules only restrict teams from taking back more than they send.

Pre-trade salary $194,904,228 First apron space $14,110,772 First Apron

Pre-trade salary $192,348,473 First apron space $16,666,527 First Apron

First Apron

Positioned higher than the luxury tax line, the first apron introduces rigorous operational limitations.

• Trades

  Strict matching is enforced. Outgoing salary cannot exceed incoming salary, meaning teams are prohibited from taking back more salary than they send out.

• Free Agency

  Available: Bird Rights, Taxpayer MLE, Veteran Minimums, or Two-Way Contracts.

  Not Available: Cap Space, Non-Taxpayer MLE, BAE

  Signings are restricted to Bird Rights, the Taxpayer MLE, Veteran Minimums, and Two-Way Contracts.

Example

Denver is at the first apron, so they cannot take back more salary than they send out. In this trade, Denver must send out $23,643,411 for the trade to succeed — and since teams at the first apron are still allowed to aggregate players, they can combine multiple outgoing players to get there. The trade on the left fails because Denver hasn't sent out enough salary; the trade on the right succeeds once they do.

Pre-trade salary $209,653,328 Second apron space $12,032,672 First Apron

Pre-trade salary $201,640,699 First apron space $7,374,301 Over the cap

Second Apron

The second apron is the league's most restrictive financial tier, designed to heavily curb high-spending rosters.

• Trades
  • Outgoing salary cannot exceed incoming salary.
  • No player aggregation: Teams cannot combine multiple players into a single trade package.
  • Prohibitions: Second-apron teams cannot use Trade Exceptions (TPEs), receive players via sign-and-trades, or send out cash considerations in trades.
• Free Agency

  Available: Bird Rights, Veteran Minimums, or Two-Way Contracts.

  Not Available: Cap Space, Non-Taxpayer MLE, Taxpayer MLE, BAE

  Signings are restricted to Bird Rights, Veteran Minimums, and Two-Way Contracts.

Example

New York is in the second apron, so they cannot take back more salary than they send out. In this trade, New York must send out $27,678,571 for the trade to succeed — but unlike a first-apron team, they cannot aggregate players to get there. They have to send back a single player whose salary alone exceeds that amount. The trade on the left fails because New York is trying to combine multiple players; the trade on the right succeeds using one.

Pre-trade salary $179,747,598 First apron space $29,267,402 Over the cap

Pre-trade salary $223,736,189 Second Apron

Understanding Trade Exceptions (TPE)

A Trade Exception (TPE) is generated when a team completes a trade taking back less salary than it sends out. For example, if Team A trades away $20M in salary and receives $10M back, they generate a $10M TPE.

Think of a TPE as a financial credit: it allows a team to bypass normal salary-matching restrictions to absorb a player's salary directly into the existing exception space.

Key TPE Rules

• Expiration: A TPE lasts for exactly one year from the date it is created.
• No Combination: A TPE cannot be combined with other players or salaries to absorb a larger contract. The target player's salary must fit entirely within the exception.
• Partial Use & Carryover: TPEs can be partially used. Using a $10M TPE to acquire a $5M player leaves a $5M remaining balance that can be utilized in a subsequent trade before the exception expires.

Glossary