Dead money is a salary cap charge for a player that is no longer on a team’s roster. It is a by-product of the various salary components of an NFL contract being accounted for differently under the salary cap. Base salaries and most roster bonuses count against the cap in the year that they are earned while signing bonuses are prorated or spread out evenly over the life of a contract for a maximum of five years. Option bonuses and roster bonuses fully guaranteed at signing are the other most common salary components that are also treated like signing bonuses.
When a player is released or traded, the remaining proration of the salary components that are treated like a signing bonus immediately accelerate into his team’s current salary cap. For example, if a player signs a five-year contract with a $5 million signing bonus, $1 million of his signing bonus counts towards the salary cap for each year of his five-year contract. If he is released after the second year of his contract, the $2 million of signing bonus proration from the last two years of the contract automatically accelerates into the club’s current cap, creating $3 million of dead money.