Every summer, Orlando Magic president of basketball operations Jeff Weltman says the Magic are operating on somewhat borrowed time.
Their payroll was relatively low. They could overspend on needed veterans for their roster on short-term deals. Everything felt like Monopoly money as the Magic could throw around salaries and contracts without many consequences.
Weltman previewed that the bill would eventually come due. Every team has to pay the piper -- or in this case, their own players. The Magic are facing a new reality this offseason.
Orlando was a bit cautious with its big spending spree last summer. They signed Kentavious Caldwell-Pope as a big-name free agent to add to the starting lineup. But the rest of the offseason was spent cementing the remaining roster.
The big task for last offseason were extensions for Franz Wagner and Jalen Suggs. Those two contracts, even with the increasing salary cap, put the Magic on the threshold of the luxury tax. That is a line they will likely blow past this season.
And with Paolo Banchero's extension set to be signed this offseason (and kicking in during the 2027 season), the Magic are about to enter a world of financial pain they have not been in since Dwight Howard's final season in 2012.
As everyone plans their offseason moves, the Magic are not only trying to improve the current roster, but also managing their cap space and trying to balance staying clear of any of the more punitive scenarios that come with the new salary cap rules.
It is a much tighter rope to walk. The Magic are navigating new waters now. They are doing what Keith Smith of Spotrac calls the "apron dance" as they try to dance around the luxury tax line and the penalties of the first apron.
It is important than to understand what those penalties and restrictions are as the Magic plan their future. While the Magic want to make short-term improvements, they cannot back themselves into a corner for the potentially more damaging penalties that come from diving too deep.
The Orlando Magic will pay the tax
The first place to start is to recognize the new reality for the Orlando Magic.
In all likelihood, the Magic will pay the luxury tax for the first time since the 2012 season, Dwight Howard's last on the team. Orlando has become that much more expensive.
The salary cap for the 2025-26 season is expected to fall at $154.6 million.
The Magic will blow past that amount with just their guaranteed salaries. Orlando has approximately $175.2 million in guaranteed salary. The Magic will pay that tax -- 1.5-to-1 for the first $5 million and escalating from there.
Orlando has dipped deep into the luxury tax waters. And that goes into every consideration for spending moving forward.
But it is not just the luxury tax that is concerning. The league put in new restrictions for those that spend well above the salary cap line.
The first apron is expected to come in at $195.9 million. That is the next hurdle after paying the tax. And it comes with loads of restrictions that limit how the team can keep growing. The Magic this year seem eager to stay below that first apron line.
The Magic have a little bit of wiggle room beneath that. But that space gets eaten into if the Magic pick up Moe Wagner's $11 million team option. Gary Harris ($8 million) and Caleb Houstan ($2.2 million) also have options the Magic could pick up.
Even using the taxpayer mid-level exception -- contracts totaling $5.7 million to sign new players -- would also creep the Magic close to the first apron line.
The Magic may not be under the first apron this year, but they will be once Banchero's contract kicks in -- if he makes All-NBA, that would account for 30 percent of the 2027 cap.
Orlando has to be aware of this and what that means. There are some major ramifications to being in the first apron.
The penalties of the first apron
It is OK not to be too familiar with the cap rules. The NBA's new salary cap rules and restrictions are extremely confusing and everyone is still wrapping their heads around it.
Certainly, the teams at the top of the pay scale are dealing with the extreme penalties that come with being above the second apron -- a projected $207.8 million for the 2026 season.
The Magic will be flirting with the first apron as it is. And while those restrictions are not nearly as punitive, they are still quite restrictive. Even with contracts rising by a maximum of eight percent and the salary cap rising by 10 percent each year (the maximum allowed and expected because of the massive new TV deal), the Magic's payroll is going to approach that amount.
It is hard to explain everything or keep it all. Keith Smith of Spotrac made this handy chart to help with all of the restrictions:
The difference is pretty clear. Teams that are above the first apron cannot acquire players via sign-and-trade, are restricted in which players they can sign in the buyout market, cannot take in more money in trades or use a traded player exception created in the prior season.
Those are a lot of restrictions that limit movement. The kicker is that if a trade takes a team over the first apron, then they are subject to those restrictions too.
For instance, if Orlando tries to make a trade for Anfernee Simons and his $27.7 million salary and that takes the team over the first apron to complete the deal, then it would not work unless the Magic are sending out equal or more money -- our most important reminder: YOU CAN ALWAYS TAKE BACK LESS MONEY IN A TRADE.
This is also part of those considerations. If the Magic are interested in a player like Anfernee Simons -- Collin Sexton and Coby White are in the same boat too -- they would have to consider what they would sign to retain them. And that would take them potentially into the second apron.
The second apron has the most punitive restrictions, limiting teams to re-signing their own free agents, draft picks and minimum contracts. Teams in that situation cannot aggregate contracts -- sending out two players for one. That is why the Kevin Durant trade with the Phoenix Suns is expected to be so complicated and why multi-team trades have become significantly more popular.
For the Magic, all of this means is they only have access to the taxpayer mid-level exception in free agency this summer. They have a little bit of wiggle room before they enter first apron territory and face some restrictions on how they acquire players.
It also means they are likely to be over the first apron for the 2027 season when Banchero's extension kicks in. The Magic have $99.9 million committed to the 2027 season before Paolo Banchero's extension, Jonathan Isaac's guarantee ($14.5 million), Kentavious Caldwell-Pope's player option ($21.6 million), Cole Anthony's team option ($13.1 million) and Anthony Black's team option ($10.1 million).
That is all rattling around the head for the team and everything it does this offseason.
The salary cap comes for everyone. That is the reality of the new collective bargaining agreement.
It is the reason why everyone anticipates the Boston Celtics to break up their team in some capacity. It is why the Denver Nuggets are seemingly at a crossroads right now and why the Milwaukee Bucks will find it hard to pivot to surround Giannis Antetokounmpo with a championship roster.
The Magic are facing the challenges every team will face at some point as they try to retain their players. The bill has come due.