In the days leading up to the start of the NFL league year, we read about teams releasing players to become compliant with the upcoming salary cap. Often alongside the information is a “dead cap” number that the team is going to have to eat in order to release the player.
Most fans understand that it is a cap charge, but there is a little more nuance to it.
What is ‘dead cap’ in NFL contracts?
Every dollar a team pays to a player needs to be accounted for on the salary cap. However, the NFL has work-arounds so you don’t need to account for the money immediately.
When a player leaves a team via trade, release, or retirement, that remaining cap charge accelerates and need to immediately be counted. That cap charge is referred to as “dead cap” because the player isn’t on the roster anymore and there’s nothing you can do to change that hit. In short, a dead cap charge is the money that’s already been paid to a player but has not yet been accounted for on the salary cap.
There is one additional piece to consider: fully guaranteed money that hasn’t been paid. If you trade a player, that guarantee goes with them to the new team. If they retire, it’s voided. If you release a player with fully guaranteed salary still left on their deal, you are still on the hook for it and it’s also part of the dead cap figure since you’re required to pay it. It’s why Russell Wilson had the largest dead cap charge in NFL history — he still had a full season of fully guaranteed salary when he was released.
Why does the NFL allow salary cap manipulation?
Because some NFL players agree to incredibly large signing bonuses at the beginning of contracts, there is a mechanism in place to prevent that massive number from severely crippling a team in the one season that signing bonus is paid.
The NFL allows a signing bonus to be prorated (or distributed evenly) among the salary cap for up to five years. If a player signs deal with a $10 million signing bonus on a five-year contract, that money counts $2 million in each year of the deal but the player gets the cash up front.
In this example, if the player was released after three years, $6 million of that $10 million would have been accounted for but $4 million would remain to be counted. That would be the player’s “dead cap” amount. They wouldn’t be on the team but carry a $4 million cap charge anyway.
How do void years play into the dead cap hit?
Increasingly, NFL teams have begun to use void years to further push cap hits into the future. A player will sign for three years, for example, but the team wants to spread out the cap hit over the five years allowed under the CBA. Tack on two void years to the three-year deal and you can spread out that cap hit over five seasons. The void years don’t have compensation because the contract is voided before those extra years actually kick in.
You’re intentionally creating a dead cap charge in that first season the player is off the team, but as the NFL’s salary cap keeps climbing, you’re hoping it’s going to go up by more than the void years you’re adding down the line.
If you extend the player prior to the end of the contract, the cap charges stay prorated and don’t accelerate. If the league year starts, the player’s contract expires, and then you re-sign them, the dead cap would have already accelerated and count.
How does the post-June 1 designation impact the dead cap?
Teams have one more way to manipulate the dead cap charge of a player called the post-June 1 designation. If you release a player after June 1, you can spread that dead cap hit over the current season and the following season. In order to let these players hit the market earlier, the NFL came up with an accounting method that acts like the player is still on the team even when they aren’t.
A player is released in March with the designation and their cap hit stays the same until June 1. Then on June 2nd, it splits into the two seasons. The player gets to sign with a new team while teams still have cap space and cash and the former team gets the eventual cap relief. It’s a win-win.
There is no post-June 1 designation for trades or retirements, but the player might not file their retirement paperwork until June to achieve the same benefit. That’s what the New Orleans Saints did with Drew Brees, for example.
We have an in-depth explainer on the post-June 1 if that doesn’t quite make sense.
Is the NFL salary cap real?
The salary cap is very real. Remember that the bill comes due. Always. Every dollar paid eventually is counted. Nowhere is that more evident than dead cap hits.
