ORLANDO –– The Orlando Magic are in one of the best financial positions of any team in the NBA heading into the new season.

According to Spotrac, the Magic’s active roster commands a payroll of $150.3 million – the fourth-lowest in the entire NBA. Only San Antonio, Utah and Detroit has less on its plate money-wise as of time of writing.

While the Magic are around $9.8 million over the salary cap for this upcoming season, penalties are not immediately assessed to them. All 30 NBA teams must operate above the salary floor, which is $126.5 million in 2024-25, and only Detroit is currently under the $140.5 million salary cap.

But the NBA, as opposed to its professional league counterparts, operates with a “soft” salary cap, meaning teams can exceed the cap under certain conditions to sign, trade or retain players.

Teams over the salary cap but under the first luxury tax apron are eligible to utilize a $12.2 million non-taxpayer MLE (mid-level exception), a bi-annual exception of $4.7 million, and have no trade or buyout restrictions.

The Magic are one of 20 NBA teams currently in this realm.

The CBA, or collective bargaining agreement negotiated between the National Basketball Player’s Association and Board of Governors, has increasingly severe penalties for teams that further exceed over the salary cap. They’ve come to be known as the two tax aprons – spots teams increasingly are looking to avoid in the new age of roster construction.

What are the tax aprons and their penalties?

The current CBA, which runs through the completion of the 2029-30 NBA season, implemented two tax aprons on the luxury tax.

Residents above the first tax apron, set at $178 million, cannot:

Five teams are currently above the first tax apron: Denver, the Lakers, Miami, New York and Philadelphia.

For offenders of the second apron, set at $188.9 million, the penalties are worse. Those teams, who are currently Boston, Milwaukee, Minnesota and Phoenix, cannot:

Further, second-apron teams can only re-sign their own free agents, sign draft picks and minimum contracts, or make trades where the salary sent out is greater than or equal to the salary coming back (1 for 2+ trades are possible.)

What does it mean for Orlando?

The Magic entered this offseason with about $50 million in cap space, and utilized a majority of it to sign Kentavious Caldwell-Pope to a three-year, $66-million deal.

Valued at around $22 million AAV, Orlando then spent the remaining cap space to re-sign, renegotiate and extend many members from its core last year. Cory Joseph, who signed later in the summer to occupy the 15th roster spot, joined on a veteran’s minimum.

Orlando’s financial situation is still in good shape. Franz Wagner’s new five-year, $224-million extension doesn’t hit the books until next season, and should Jalen Suggs’ camp and the Magic come to an agreement on an extension before the Oct. 21 deadline, it also wouldn’t take effect until the 2025-26 season.

Paolo Banchero is a year away from being extension eligible, where he’ll certainly be a surefire max contract recipient. But the Magic’s books are well setup to handle the bigger paydays coming in the future.

As for the Magic’s relation to other teams, they may become a desirable trade partner for teams needing to offload bigger salaries. Orlando has pieces that could interest other teams with positional needs on team-friendly deals, but for some competitors, making the money match is a tougher ask than others.

Here’s the Magic’s current salary table heading into 2024-25:

* McClung’s deal is reported but not yet confirmed by the Magic.

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