Guide
How a buyout is priced and spread, what a club may keep of a traded contract, and the charges that stay on the books for players who are no longer on the roster.
Dead cap is the part of a club's total that pays for nobody on the roster. It comes from three places: a contract the club bought out, salary the club agreed to keep when it traded a player away, and performance bonuses from last season that pushed the club over the ceiling. Each is a real charge against the upper limit, counted exactly like a player's cap hit, and each is listed on the club's cap sheet in its own row.
A club may end a contract early by buying it out. It pays the player a share of the salary still owed him, spread over twice the seasons that were left, and the cap charge is spread the same way. The share depends on his age on the day the buyout takes effect: 1/3 of the remaining salary if he is under 26, 2/3 if he is 26 or older. Signing bonuses are not reduced; they are paid in full, and they stay in the cap hit.
In each season the contract would have run, the club's cap charge is the original cap hit less what the buyout saves it that season, which is that season's salary less the buyout payment. In the added seasons after the contract would have ended, the charge is the buyout payment alone. Because the saving is measured against salary and the charge against the cap hit, a back-loaded contract can produce a cap credit in its early seasons and a larger charge later.
Here is the arithmetic for a 28-year-old with 2 seasons left at a $6,000,000 cap hit, paid $5,000,000 a season with no signing bonus:
The club saves $3,333,333 of cap in each of the next 2 seasons and pays for it with $1,666,667 a season for 2 seasons after that. Whether that is a good trade depends on what the club does with the room.
Buyouts have their season. A club may give notice from June 15, or 48 hours after the Stanley Cup Final ends if that is later, until June 30 at 5 p.m. ET. A club with a player going to salary arbitration gets a second, shorter window after its last case is settled. Before the buyout takes effect the player must clear unconditional waivers, unless his contract has a no-movement clause. A contract signed by a player aged 35 or older follows different rules and is not covered here.
When a club trades a player, it may agree to keep paying part of his contract so that the other club takes on less. The share it keeps comes off both his salary and his cap hit, by the same percentage, for every season left on the deal, and it stays on the first club's books as dead cap until the contract ends. It is the usual price of moving a contract a club no longer wants.
Performance bonuses are not part of a cap hit; they count when they are earned. A club that ends the season with earned bonuses it has no room for finishes over the ceiling, and the excess is charged to the next season as a bonus overage. It appears on the cap sheet as a single dead-cap row, often a small one, and it is the usual reason a club starts a season with a little less room than the ceiling suggests.
On a team's cap page, buyouts, retained salary and bonus overage are listed under dead cap, each with the seasons it still has to run, and each counted in the club's total at the top of the page. Each club's scenario tool lets you try a buyout of any contract on the roster and see what it would add to the sheet. The definitions are on the Methodology page.