Understanding NFL Dead Cap

Michael Ginnitti
Michael Ginnitti, Managing Editor & NFL/MLB ExpertFebruary 08, 2023
© USA TODAY Sports

The unfortunately named, often confused, NFL buzz phrase finds itself at the forefront of many conversations this time of year, as roster decisions begin to take shape for the upcoming season. So what is dead cap? Any future, unpaid, guaranteed salary or bonus or any already paid signing bonus that hasn't yet been allocated to the salary cap becomes the responsibility of the team in the event of a release. With a trade, the future guarantees would simply transfer to the new team, leaving behind just the unallocated bonus cap as the current team's dead cap. Still lost? Hopefully the following helps a little...

Example Contract: Player A

  • Total Contract: 5 years, $77.5 million
  • Signing Bonus: $20 million
  • Guaranteed at Signing: 2023 salary, 2024 salary

Out of the gate, this contract comes with $35M of dead cap - the total amount guaranteed at signing (signing bonus + 2023 base salary + 2024 base salary). Once the player completes his offseason workout program, that $100,000 bonus will be added to the dead cap total. If we look at the 2024 dead cap initially, it represents four years of signing bonus proration ($4M x 4), plus the not yet paid but fully guaranteed $10M base salary, or $26M total. 

Future Guaranteed Salary or Roster Bonuses

Any guaranteed base salary that has yet to be paid out is considered dead cap on the contract. Should the player be released, all guaranteed salary will accelerate and be treated as dead cap in the current season. If traded, any unpaid guaranteed salary will transfer to the new team.

Signing or Option Bonuses

When signing or option bonuses are paid, the cap hits for these prorate over the remainder of the contract (max 5 years). For instance, a $20M signing bonus paid on a 5 year contract would account for $4M of bonus cap in each of the contract’s years. If this said player is released prior to year 3 of the contract, that leaves $12M of cap from that bonus still unallocated, which in turn becomes dead cap. This works the same for an option bonus (generally paid out in year 2 of a contract).

The June 1st Dead Cap Rule

Pre June 1st

If a trade, release, or retirement is processed before June 1st in a given league year, ALL of the current & future dead cap associated with the contract is accelerated into the current season.

If Player A was released on March 20th prior to his 2nd season, all $26M of dead cap remaining on the contract (the $10M base salary + $16M of signing bonus cap) would accelerate into dead cap immediately. The team would take on a $26M dead cap hit, losing almost $12M in space.

Post June 1st

If a trade, release, or retirement is processed after June 1st in a given league year, the dead cap allocation splits between the current & following year as such:

Current Year Dead Cap
Any bonus proration in the current year of the contract + any unpaid guaranteed salary or roster bonus. Any cash owed to the player via base salary or roster bonus would immediately accelerate the current year’s dead cap.

Next Year Dead Cap
All of the remaining unallocated bonus dead cap for all future years of the contract.

For Example:
If Player A was cut on June 2nd prior to his 2nd season, the $26M of dead cap would split as:

Current Year: $4M of current year signing bonus proration + $10M guaranteed salary: $14M
Next Year: $12M of remaining future year signing bonus proration

The Post June 1st Designation

Per the terms of the current CBA, each team is now able to designate two players as “Post June 1st releases”. If Player A’s team knows they want to release him, but also want to benefit from the dead cap split after June 1st, they can designate him as such as soon as the league year begins in March. A few things to note here:

  • The designating team must carry his entire cap hit for that current year on their books until 4PM ET June 1st. At that point, the transaction (release or retirement) can become official, and the Post June 1st dead cap split can occur. So in our Player A example, if he were designated as a Post 6/1 Release in March of 2024, his team would need to carry a $14.1M cap figure on their books until 6/1.
  • Any bonuses or salary triggers that were set to happen prior to June 1st are no longer valid, as the contract has been unofficially ceased per the designation.
  • This designation is only available for releases - not trades. It can unofficially be used in retirements as a player can announce his intent to retire in March, but the team can wait to process that designation until after June 2nd for dead cap purposes.
  • The player is free to negotiate and sign elsewhere immediately upon the Post 6/1 Designation occurring. They do not need to wait until June 2nd.

The Post June 1st Cap Hit Work Around

One of the more popular recent trends is manipulate a contract prior to the start of a league year (or even immediately prior to a Post 6/1 Designation), in order to make life a little easier for a few months. What are we talking about?

Player A is going to be released with a Post June 1st Designation in March of 2025, but the team doesn’t feel great about carrying a $16.1M cap figure until June 1st just to allow for this to happen. They work with the player/agent to negotiate a “dummy restructure”, lowering his $12M base salary down to the league minimum (let’s assume $1.5M) prior to the release occurring. Now, the team can carry his contract at a $5.6M cap hit through June 1st, then process the release officially.

Why would the player agree to this? Any non-guaranteed salary on a contract that’s about to be ripped up is essentially funny money. The player is off to free agency in search of a new deal, so generally speaking, most player/agents are getting on board with helping the team out in situations like this.

 

Still lost? Additional or more specific questions? Hit us up @spotrac.


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