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Salary Cap 101: Explaining ‘dead money’ and the NFL salary cap

Carson Wentz was traded by the Eagles to the Colts but he leaves behind in Philadelphia a massive dead-money hit.
Carson Wentz was traded by the Eagles to the Colts but he leaves behind in Philadelphia a massive dead-money hit.Matt Ludtke/Associated Press

Mike Suvalle of Framingham wrote in an email this week: “Could you please explain dead cap space? When the Eagles traded Wentz, why didn’t they eliminate his salary?”

It’s a great question, and with NFL free agency starting in three weeks, an important one to address. Take out your pencils and paper, it’s time for Salary Cap 101.

Before getting specifically to Carson Wentz and the definition of dead cap space, let’s start with how NFL contracts and the salary cap work.

The NFL is different from other professional sports in two key areas: Most contracts are not fully guaranteed, and there isn’t a 1:1 ratio between cash spending and salary-cap dollars.

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The NFL devised its own accounting system 30 years ago when it instituted the salary cap, which provides teams the flexibility to push cap dollars into future years. It’s pretty easy to play with the numbers so you can fit a player under the salary cap. In the NFL, 2 + 2 can equal 4, or 5, or 3.

Signing bonuses and cap numbers

The most significant way a team can play with cap dollars is through a signing bonus, which can be prorated over the life of a contract, up to five years. If Player X signs a five-year contract that comes with a $20 million signing bonus, he gets the cash up front, but the bonus counts $4 million per year against the cap each of the five years. (Note: If a player signs a six-year contract, his signing bonus still can be prorated up to only five years.)

Generally speaking, a player’s salary-cap number is the combination of his base salary, any offseason or roster bonuses he is owed that year, and a proration of any signing bonus (there are exceptions involving per-game roster bonuses and incentives that are too cumbersome to get into here).

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Example: Player X in 2021 has a $3 million salary, $50,000 offseason workout bonus, $500,000 in per-game roster bonuses ($31,250 per game active), and a $4 million signing bonus proration, for a cap number of $7.55 million.

This system works out well for free agents at the beginning of their contracts, when they can get a large payday and a lower salary-cap number. It doesn’t work out so well at the end of their contracts, when their cap number is usually much higher than their nonguaranteed salary, which often leads to a release.

Moving dollars around

When teams want to create cap space, they can simply take most of a player’s base salary and convert it to a signing bonus. The player has to agree to it, but all players do, because it gives them one lump-sum payment immediately instead of having to wait for 17 payments in the fall.

What does the future hold for Ben Roethlisberger?
What does the future hold for Ben Roethlisberger?Keith Srakocic/Associated Press

Example: Ben Roethlisberger is due $19 million this year, and the Steelers need to create cap space. One solution would be to sign Roethlisberger to a new three-year deal with a $15 million signing bonus and $4 million salary this year. This would pay him the same amount of money this year, but would lower his cap number by $10 million by pushing $5 million into each of 2022 and 2023.

Dead salary-cap money

Now let’s get to “dead salary-cap money,” or “dead money,” for short. It’s the salary-cap prorations that have yet to be accounted for when a player is traded or released before his contract expires.

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Example: Going back to Player X, let’s say that the team is going to release him before the 2021 season after he completed three of the five years on his contract. While he keeps the entire $20 million signing bonus, his team accounted for only $12 million of it on the cap. The team doesn’t owe Player X any more money, but does have to account for the final two signing-bonus prorations. Those get accelerated to the team’s 2021 salary cap, leaving it with a dead cap hit of $8 million. Come 2022, Player X is off the books completely.

There is an exception, and it’s called the “Post-June 1 rule.” Players traded or released on June 2 or later get the remaining signing bonus prorated over two years. Teams are also allowed to release two players before June 1 with a “post June-1” designation, but must carry that player’s full cap hit until June 2.

Example: If Player X is released post-June 1 with two years left on his deal, the team takes a $4 million dead cap hit in 2021, and $4 million in 2022. If Player X is released with three years left on his deal, the team takes a $4 million dead cap hit now, and $8 million next year.

Players with no dead money on their contract are most at risk of being released or traded (the Texans had no trouble granting J.J. Watt his release because he was due a $17.5 million salary with no dead money). Conversely, having a large dead cap number often protects a player’s roster spot. But in recent years teams have become increasingly cavalier about taking on dead money (though that could change in 2021, with the salary cap set to drop by about $15 million because of the pandemic).

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J.J. Watt was recently let go by the Texans.
J.J. Watt was recently let go by the Texans.Matt Patterson/Associated Press

In 2020, the Patriots had more than $31.78 million in dead cap space, or 15.5 percent of their total salary-cap allotment. This included $13.5 million for Tom Brady, $4.75 million for Antonio Brown, and a total of $4.65 million for Michael Bennett, Stephen Gostkowski, and Duron Harmon.

But this was likely a one-year aberration to get the books in order. The Patriots currently have just $865,000 in dead cap money for 2021, though more is certainly coming. If cornerback Stephon Gilmore is traded, it will leave the Patriots with $8.9 million in dead cap money, but will still free up about $7.34 million in space.

(That’s an important point to remember over the next few weeks. While releasing a player often creates dead cap money, it also in many cases frees up extra cap money, since the team is no longer responsible for the base salary. The Patriots currently have about $60 million in cap space, but will inevitably create more in the coming weeks when a handful of veterans are traded or released.)

Carson Wentz and the Eagles

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Finally, let’s get to Wentz, who has unofficially been traded to the Colts (the trade can’t become official until the first day of the new league year, March 17).

Before the trade, Wentz was on the Eagles’ books for a 2021 cap number of $34,673,536. (His contract has a complex structure with oddly specific numbers because of the “30 percent rule,” which states that salaries in years that run past the expiration of the collective bargaining agreement can’t increase by more than 30 percent. Wentz signed his contract in June 2019, and the new CBA wasn’t agreed to until March 2020.)

This included a $15.4 million base salary, a $10 million roster bonus due on the third day of the league year, March 19 (which does NOT get prorated), and $9,273,536 in bonus prorations (one-fifth of a $16,367,683 signing bonus he got in 2019, and one-fifth of a $30 million option bonus he got in 2020).

Carson Wentz is going from Philadelphia to Indianapolis.
Carson Wentz is going from Philadelphia to Indianapolis.Chris Szagola/Associated Press

With the trade, the Eagles don’t owe Wentz another penny. The Colts will have to pay the $15.4 million salary and $10 million roster bonus, and are on the hook for Wentz’s fully guaranteed $22 million salary next year, too. Those will be his cap numbers in Indianapolis, as well, since the bonuses stay with the Eagles.

But the Eagles are taking a massive dead-money cap hit on Wentz in 2021 — $33,820,611 — because all of his unaccounted bonus money gets accelerated to this year’s cap. That’s three years of signing bonus (a total of $9,820,611) and four years of the option bonus ($24 million).

The $33.82 million dead-money hit for Wentz is the largest in NFL history (the previous high was Brandin Cooks’s $21.8 million with the Rams last year). The Eagles certainly will be hamstrung by having more than 17 percent of their 2021 salary cap consumed by a quarterback no longer with the team. But they got out from the cash commitments to Wentz, and will have him off the books completely in 2022.

And believe it or not, the Eagles created $852,925 in cap space for 2021 (though it’s really less than $100,000 because of the Top 51 rule, which states that in the offseason only a team’s top 51 active contracts count against the cap).

For good resources on the salary cap for all 32 teams, check out the websites OverTheCap.com and Spotrac.com. For Patriots salary-cap analysis, Miguel Benzan (@patscap on Twitter) does a great job tracking every dollar.

And thus concludes today’s lesson on dead salary-cap money. Any questions?


Ben Volin can be reached at ben.volin@globe.com. Follow him on Twitter @BenVolin.