Definition of Dead Money

What does the term "dead money" mean in the world of the NFL? What is meant by the term "dead money"?

"Dead money" is a complex concept that details how player contracts and salary cap hits must be squared off in the NFL.

In the NFL, signing bonuses can be prorated for up to 5 years, which allows teams to spread out a cap hit.

For instance - let's say that Aaron Rodgers signs a 5-year, $150 million deal with the Green Bay Packers. This includes a $50 million signing bonus, a base salary of $19 million a year and five $1 million workout bonuses.

There is $100 million in guaranteed money in this deal.

In the first year of the contract, Rodgers receives a total of $70 million in compensation from the club, though his cap hit for the year isn't $70 million.

Instead, the Packers can prorate his bonus over 5 years, so his cap hit would work out to $30 million a year.

Now, let's say that Rodgers is cut after his second year for some weird reason.

He has received a total of $90 million in compensation, but he has $10 million more guaranteed to him.

In order to fulfill the contract, the Packers would need to pay Rodgers $10 million more before releasing him.

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Now, this is where the dead money, or dead cap, comes in.

Would it be fair for the Packers to have paid out Rodgers $100 million for two years of service, but they only took two $30 million cap hits?

Of course not.

So, the NFL has "dead money", which counts against the cap.

In order to figure out the dead money hit, use this formula:

(Total Money Paid Out in Real Dollars) + (Remaining Guaranteed Money) - (Total Cap Hit Taken Over Contract)

So, in this case, the calculation would look like this:

$90 million plus $10 million - $60 million = $40 million

So, the Packers would have dead money cap hit of $40 million if they decided to release Rodgers.

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NFL teams will often use voidable years to fit players under their cap, though this leads to dead cap hits in the future.

For instance, let's say that a player signs a 5-year deal with two voidable years at the end of the contract. Maybe they are getting older and only plan to play for another three years.

By adding voidable years, teams can spread a cap hit over five years instead of just three.

This can come in handy if teams are planning on rebuilding in three years, and plan on having one or two superstar players gone by that time.

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The concept of the dead cap is extremely complex, though this summarizes the general concept.