TAX NEWS - 2010

US Tax: NBA sets 2010-11 salary cap, giving Wizards an extra $2 million

The Washington Wizards found out Wednesday night they will have about $2 million more to spend on free agents this summer after the NBA announced that the salary cap for the 2010-11 season will be $58.044 million.

That is slightly more than the projected figure of $56.1 million that teams had anticipated when the free agent negotiating period began on July 1. It is also an increase from $57.7 million last season, when the salary cap decreased for just the second time since it was instituted in 1984.

The luxury tax figure for next season is $70.3 million, up from $69.9 million last season, and teams that exceed that figure will have to pay a dollar tax for every dollar over that number. The mid-level exception is $5.765 million and each team's minimum total salary -- which is set at 75 percent of the salary cap -- is $43.43 million.

The Wizards are expected to complete a trade with Chicago for Kirk Hinrich and the 17th overall pick, Kevin Seraphin, on Thursday, which would add about $10.2 million in salaries to the roster. They made a trade with New Jersey last week to acquire forward Yi Jianlian, who will earn $4.5 million.

After signing draft picks John Wall ($4.2 million), Trevor Booker ($1.1 million) and possibly second-round choice Hamady N'Diaye ($470,000), the Wizards would have roughly $48 million committed to 11 players, leaving them with around $9 million in available cap space to use toward roster upgrades.

The Wizards have not agreed to terms with any free agents, but adding a veteran wing player is their primary focus this offseason. They have contacted the representatives for Mike Miller, Josh Howard, Josh Childress, Ryan Gomes, Travis Outlaw and Rasual Butler.

The new salary cap will go into effect at 12:01 a.m. Thursday, when the league's moratorium period on free agent signings and trades ends.

The Wizards experienced a huge turnaround from the beginning of the season, when the surprising dip in the salary cap had them staring at a $78 million payroll and expecting to make a luxury tax payment - for the first time in franchise history.

But after the team foundered, the Wizards aggressively worked to get under the luxury tax by dealing away Antawn Jamison, Caron Butler, Brendan Haywood and DeShawn Stevenson near the trade deadline. They also made extra savings by reaching buyout agreements with Zydrunas Ilgauskas and Mike James. Instead of making a $9 million luxury tax payment, the Wizards received a rebate check worth $3.7 million from the league for staying under the tax line - and almost $14 million turnaround.