The National Basketball Association's salary cap for the 2007-08 season will be $55.6 million, the league announced on Tuesday.
The new salary cap goes into effect on Wednesday when a 10-day moratorium ends and teams can begin signing free agents and making trades.
League officials said the tax level for the upcoming season will be $67.9 million, meaning any team whose salary exceeds that figure will have to pay a so-called luxury tax.
Teams whose salary exceeds $67.9 million will pay a $1 tax for each $1 it goes over the amount.
Last season the salary cap was set at $53.1 million and the tax level was $65.4 million.
The salary cap is calculated as a percentage of the NBA's revenue from the previous season.