What is dead cap in nfl?

Dead Cap in the NFL

Dead cap refers to the amount of money a team is charged against its salary cap for a player who is no longer on the roster. This typically occurs when a player is cut, traded, or retires before the end of their contract. The dead cap hit represents the remaining guaranteed money owed to the player.

How it Works:

• Guaranteed Money: The primary driver of dead cap is guaranteed money in a player's contract. This includes signing bonuses, guaranteed salaries, and other forms of compensation that the team is obligated to pay regardless of whether the player remains on the roster.

• Acceleration: When a player is released or traded, any remaining prorated signing bonus money (spread out over the life of the contract for cap purposes) immediately accelerates onto the team's salary cap for that current league year.

• The June 1st Rule: Teams can designate two players per year as post-June 1st cuts or trades. Doing so allows the team to spread the dead cap hit over two seasons. The dead cap hit for the current league year is the prorated signing bonus from previous years. The remaining dead cap, mainly the current year's prorated signing bonus, hits the following league year.

Causes of Dead Cap:

• Releasing Players: Cutting a player is the most common cause of dead cap.
• Trades: Trading a player can also create dead cap, especially if the team retains a portion of the player's salary or if there are remaining prorated signing bonus amounts.
• Retirements: A player retiring can cause dead cap if there is remaining guaranteed money or unamortized signing bonus.
• Contract Restructures: Restructuring a contract, while providing short-term cap relief, often adds years and prorated money that can result in larger dead cap hits down the road.

Impact on Teams:

• Limited Spending Power: Dead cap reduces a team's available salary cap space, hindering their ability to sign free agents or extend the contracts of current players.
• Roster Building Challenges: Significant dead cap can force teams to make difficult decisions about roster construction and player acquisitions.
• Strategic Considerations: Teams must carefully weigh the immediate cap relief of releasing a player against the long-term consequences of the dead cap hit.

Managing Dead Cap:

• Careful Contract Negotiation: Minimizing guaranteed money in contracts is key to reducing potential dead cap liabilities.
• Strategic Player Evaluation: Thoroughly evaluating players before signing them to large contracts can help avoid situations where a player needs to be released prematurely.
• Effective Cap Management: Employing sound cap management strategies, including the use of the June 1st designation and strategically restructuring contracts, can help mitigate the impact of dead cap.