NHL Salary Cap Explained

The NHL salary cap is the structural force behind almost every trade rumor, signing, and roster decision you read about. Understand the cap and you understand why a team holds onto a player they don't want, why a contender pays a premium at the deadline for a six-week rental, and why $4M of cap space matters more than $40M of real-dollar payroll. This guide walks through the cap as a system — how it's set, how it's enforced, and the tools teams use to bend it without breaking it.

The cap, the floor, and the midpoint

The salary cap has three numbers:

• Upper limit — the cap; teams can't have aggregate cap hits above this number
• Floor — the lower limit; teams must spend at least this much in cap hits
• Midpoint — informational; sits halfway between upper and lower

Recent upper limits:

Season	Upper Limit (USD)
2005–06 (first cap year)	$39.0M
2014–15	$69.0M
2018–19	$79.5M
2019–20	$81.5M
2020–21	$81.5M (flat — COVID)
2022–23	$82.5M
2023–24	$83.5M
2024–25	$88.0M
2025–26	$95.5M

(Values are the publicly-reported league-set upper limits; the floor sits $20M below in each year.)

The cap is tied to hockey-related revenue (HRR) under the CBA. Players' share of HRR is fixed; the cap moves to reflect what 50% of HRR will be in the coming season. When league revenue jumps — new TV deal, expansion fees, strong attendance — the cap jumps with it.

Cap hit vs. actual salary

This is the most-confused part of the cap system, and the most important.

A contract's cap hit is the average annual value (AAV) — total contract value divided by total years. That AAV is what counts against the cap each season, regardless of how much the player is actually being paid in cash.

A simple example. A player signs an 8-year, $80M contract. His AAV is $10M. But the team can structure the cash payouts however they want within league rules:

• Front-loaded: $13M, $13M, $12M, $11M, $10M, $8M, $7M, $6M
• Back-loaded: $7M, $8M, $9M, $10M, $11M, $12M, $12M, $11M
• Signing-bonus heavy: Bulk of money paid out July 1 each year as bonus

In every case, the cap hit is $10M every year. The cash distribution is for the player's preference and for tax/lockout protection (signing bonuses are guaranteed and paid early — they survive a lockout, which is why star players favor them).

Why this matters for trades: when a contender is looking to trade for a player mid-season, the cap hit they absorb is calculated on a per-day basis. A $5M-AAV player traded at the deadline counts against the new team for only the fraction of the season they were on the roster, even if the player's actual cash for the year has already been mostly paid.

LTIR (Long-Term Injured Reserve)

If a player will be out for at least 10 games and 24 days, the team can place him on Long-Term Injured Reserve. LTIR doesn't remove the player's cap hit — it provides "cap relief" that allows the team to exceed the cap by up to the amount of the LTIR player's cap hit.

The mechanics are detailed (and the way "accrued cap space" interacts with LTIR is genuinely confusing), but the practical upshot:

• A team with a player on LTIR can add new salary up to the LTIR player's cap hit
• That space is not pro-rated daily the way regular cap space is
• A team that goes "into LTIR" early in the season has effectively reduced cap headroom; one that stays cap-compliant until the deadline, then puts a player on LTIR, maximizes flexibility

This is the loophole behind one of the most controversial pieces of the cap system: deadline-day LTIR strategy. A team carries a big-AAV injured veteran on regular IR (still on the cap) all season, accrues daily cap space, and then puts him on LTIR right at the deadline to add a high-priced acquisition. The player technically returns "from injury" just in time for the playoffs, when the cap doesn't apply. Tampa, Vegas, and Chicago have all run versions of this play; debate over whether the league should close it has been ongoing for years.

Retained-salary transactions

When teams trade a player, the team trading him away can retain up to 50% of his cap hit on the contract. That portion stays on the trading team's books for the duration of the deal; the receiving team only counts the remaining cap hit against their cap.

Three rules shape the market for retention:

1. Max 50% per transaction. One team can't retain 80%.
2. Max 3 teams in the chain. If Team A trades a player to Team B and retains 50%, Team B can later trade him to Team C and retain 50% of their remaining 50% — leaving Team C with 25% of the original cap hit.
3. A team can retain on no more than 3 contracts at a time. So a retention is a real, ongoing commitment.

The 3-team chain is why "broker teams" (often the Sharks, Coyotes, Senators — non-contenders with cap space) participate in deadline deals they otherwise wouldn't. They take a contract, retain a slice of the cap hit, and flip the player to a true contender in exchange for a draft pick or prospect from the receiving team.

A real example: a $10M AAV star can land on a contender at $2.5M (Team A retains 50%, Team B retains 50% of the remainder, Team C — the contender — pays $2.5M). The contender gets a star at a depth-piece cap hit.

Bonus overages

Players on entry-level contracts can earn Schedule A and Schedule B performance bonuses on top of their base AAV. If a team's total cap commitments plus realized bonuses exceed the cap at season-end, the overage is charged against the next season's cap.

There's a bonus cushion of 7.5% of the upper limit — teams can go that far over during the season without penalty. Beyond it, the overage shifts to next year. Teams loaded with elite young players (Toronto in the Matthews/Marner/Nylander rookie years, Edmonton at various points with McDavid and Draisaitl) routinely carry bonus overages into the following year.

For more on how Schedule A and B bonuses work, see the Entry-Level Contracts guide.

Buyouts

A buyout is when a team terminates a contract early and pays out a portion of the remaining money over a longer period. The cap consequences:

• Players bought out at age 26 or older receive 2/3 of remaining salary, spread over twice the remaining contract years.
• Players bought out under 26 receive 1/3 of remaining salary, spread over twice the years.

The cap hit calculation is more elaborate (it depends on signing bonus structure and year-by-year cash), but the general effect: a buyout creates a small annual cap hit that lasts longer than the original deal would have. Buyouts work best when the original contract had a back-loaded structure (lower cash in later years) — those produce the smallest post-buyout cap hits.

Cap-hit recapture is the gotcha for pre-2013 contracts: if a player signed a back-diving "lifetime" contract before 2013, retired or bought-out years can trigger a recapture penalty that hits the team's cap retroactively. It's why the Detroit Red Wings (Zetterberg), New Jersey (Kovalchuk historically), and a few others have had unusual cap charges show up years after the fact.

Common moves to gain cap space

When you read a deadline rumor saying a team is "looking to clear cap space," they're usually doing one of:

• Trade a contract (often with a sweetener — a prospect or pick — going to the receiving team)
• Retain salary going out to absorb less cap from the player coming back
• Bury a contract — send a player to the AHL; the first ~$1.15M of cap hit is buried (no longer counts), reducing the effective cap hit by that amount
• LTIR maneuvering — time injuries to maximize deadline acquisition room
• Buy out an unwanted contract in the buyout window (June)

Each move has trade-offs. Buyouts create future cap hits. Trades require sweeteners. LTIR depends on legitimate injuries (and on the league not closing the loophole). Burying contracts only works for clearly-AHL-quality players.

Why the cap shapes everything

Every NHL story has cap math underneath it:

• "Why won't the [team] trade for X?" → They don't have the cap room.
• "Why is X player on the trade block?" → His cap hit is making roster construction impossible.
• "Why did the deadline market explode?" → Cap-poor teams retained heavily on contracts; the new CBA's rising cap created flexibility nobody had.

The cap is also why teams trade Stanley Cup picks for ELC players, why the deadline market reveres broker teams, and why long-term back-loaded deals get signed even though they look ridiculous in their final years.

The bottom line

The NHL salary cap isn't just a financial limit — it's the shape of the modern game. Cap hits, LTIR, retention, buyouts, bonus overages: each is a tool teams use to navigate the limit. The smart teams treat cap planning as the second roster, alongside the actual 23-man depth chart. The lazy teams find out, every July 1, that they don't have room for the player they wanted.

For the contract structure that sits at the start of every cap calculation, see the Entry-Level Contracts guide. For what happens when contracts expire, see the UFA vs RFA guide. For how the waiver wire interacts with cap maneuvering, see the Waivers guide.