NBA teams begin to get penalized or taxed based on how far over the salary cap a team’s payroll goes. This upper spending limit is also determined during the offseason using a particular percentage of BRI. From there, teams begin to incur penalties for each dollar they spend over the previously established tax threshold. Furthermore, these penalties increase based on a ‘tiered’ system that breaks penalties down into ranges. However, a team’s final luxury tax payment does not become official until the end of the regular season. So if a team begins the season over the tax line, they can still make moves during that season to bring their total payroll below the line, so that they can reduce or completely eliminate any luxury tax payments.
e.g. The luxury tax threshold for the 2019-2020 campaign was set to $132 million. The Portland Trailblazers ended their season over the tax by $3,965,295. That places them into the first ‘tax bracket’, that covers $0 to $4,999,999. They were taxed at a rate of $1.50 on the dollar.