How do the NFL salary cap and cap space work? A detailed look at the system

NFL free agency is fast approaching, which means fans hear a ton about teams trying to get under the cap. But what does "under the cap" mean in the first place?

The phrase is in reference to the league's salary cap. The NFL uses a "hard" cap system, which means teams are not allowed to go over the set figure for any reason. This is different than sports that use a "soft" cap, where teams can go over and simply pay fines.

So how does the system work, and what determines cap space? Let's take a closer look.

How does the NFL's cap space system work?

AFC Championship - Tennessee Titans v Kansas City Chiefs

While the cap itself is a "hard" one, the amount changes year on year based on league revenues. The amount in 2022 is $208.2 million, which is way up from the 2021 figure of $182.5 million. This significant jump is because the 2021 cap was reduced due to lost revenues during the COVID-19-impacted season.

So each team in 2022 has $208.2 million as the ceiling in terms of spending. Yet that is only the set figure as a base amount. NFL teams can carry over cap room from year to year, depending on how they spent the prior season. Given the savings just seen, this allows teams to go over the figure technically. The incentive here is that teams don't operate with a tiny salary table every season, promoting big spending after some savings and rebuilding.

#UPDATE: In 2024, each team has $255.4M to spend on players due to an increase in the salary cap.

One aspect of the system that may confuse fans is how players can move their money around to fit into the salary cap. A popular way to do this is to turn money into a signing bonus and spread it out over several seasons.

For example, a team can sign a player to a $10 million deal with $9 million of it being considered a signing bonus, which can be spread out over several years. That could even create a scenario where a player has several years of cap hits remaining after the contract expires. So the player gets their cash while the team pushes off payment to a future date.

What are the benefits of this? The constantly rising salary cap usually means teams are comfortable pushing money off into the future, expecting it not to be as big of a burden as it would be in the present. So teams can accept a $10 million cap hit four years down the road if it ends up helping them win now.

The salary cap can be confusing, yet fans need to remember that teams must be under a certain threshold every season. How they get there is up to them.

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