What is the MLS Salary Cap? Designated Players and TAM/GAM explained

A beginner friendly guide to the MLS salary cap. Learn what Designated Players are and how TAM and GAM shape squad building.

If you’ve ever tried to understand how teams in Major League Soccer build their squads, you’ve probably had the same reaction as everyone else. Confusion, followed by more confusion, followed by someone mentioning TAM or GAM and not having a clue what they’re talking about. 

That’s probably because the MLS salary cap works very differently from most football leagues around the world. Instead of open spending, teams operate within a squad budget, with a few carefully designed loopholes that allow star players and smart, targeted recruitment. 

A quick overview of the MLS salary cap system

MLS operates as a single-entity league, which means player contracts and spending are more tightly controlled than in many other competitions. The goal of the salary cap is to keep teams competitive and prevent spending gaps from becoming too extreme.

Each club is given an annual MLS squad budget, which limits how much it can spend on the majority of its players. This budget covers most of the roster and is adjusted slightly each season.

The idea behind it is simple, teams have to make smart choices. You can’t just spend millions to buy an entire squad of stars. Instead, you need to balance costs with talent and follow the rules closely to avoid penalties. 

Why MLS uses a salary cap

The salary cap exists to promote parity. MLS wants as many teams as possible to remain competitive throughout the season, rather than allowing a handful of clubs to dominate through aggressive spending.

It’s a pretty good rule in principle and the approach has helped the league grow. The caps mean expansion teams can compete quickly, smaller-market clubs are protected, and results are less predictable year to year.

Of course, fans and clubs still want star talent. That’s where Designated Players come in.

What is the Designated Players rule?

The Designated Player rule is MLS’s most famous exception to the salary cap. It allows clubs to sign up to three players whose salaries exceed the normal budget limit. Clubs must decide carefully how to use these slots, as a poorly chosen Designated Player can limit flexibility across the rest of the squad.

Only a portion of a Designated Player’s salary counts toward the MLS salary cap. The rest is paid by the club’s owner. This lets teams attract big-name players without breaking the system. 

Well-known stars have arrived in MLS through this rule, helping raise the league’s profile while keeping spending under control. The first ever Designated Player was David Beckham and that’s why the rule is colloquially referred to as the “Beckham Rule”.

What is TAM and how does it work?

Targeted Allocation Money, usually called TAM, helps teams buy down the salary cap hit of certain players.

TAM is used for players who earn more than the standard maximum salary but do not quite reach Designated Player levels. By applying TAM, a club can reduce how much of that salary counts toward the MLS squad budget.

This allows teams to sign strong, reliable starters without using a Designated Player slot. TAM is often used to secure players that strengthen the core of a team, such as centre-backs, midfielders, or keepers. In short, TAM helps clubs add quality without going all-in on superstar signings.

What is GAM and why does it matter?

General Allocation Money, or GAM, is the most flexible tool in the MLS system.

GAM can be used in several ways. It can reduce a player’s salary impact, help sign new players, or be traded between clubs as part of transfer deals.

Because it’s so versatile, GAM plays a huge role in team building. Smart use of GAM can turn an average squad into a competitive one, especially when combined with TAM and Designated Player slots.

TAM and GAM work together to give teams options. Instead of spending heavily on a few players, clubs can spread quality across the roster. This is why MLS squads often look different from those in Europe. Team makeup is a lot more tactical. Teams that understand how to balance the MLS salary cap, Designated Players, and allocation money tend to perform more consistently over a season. 

See how your favourite MLS squad changes across the season with Match Bingo

Track MLS squads, follow roster moves, and see how salary cap decisions shape teams throughout the season.

Download now!