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James Harden and the Rockets have agreed to a $118 million contract extension

Harden will be under contract in Houston until 2020, though he now has a player option for the 2019-20 season.

Kelley L Cox-USA TODAY Sports

James Harden and the Houston Rockets have agreed to a four-year, $118 million contract renegotiation that will extend the Rockets superstar's contract through 2020, the Rockets announced on Saturday.

Harden will make $26.5 million next season, the maximum a player with his years of service can make under the new salary cap. Harden will have a player option in his final year.

Though most contract extensions are not permitted, there is an exception that allows teams with excess cap space to bump a player's current salary up after the third year of a contract that was originally four or more years in length. Harden signed a five-year, $78 million contract extension that began in 2013, so this was the first year he was eligible for this provision. He was originally slated to make $16.8 million this year before this new arrangement.

The Rockets have about $10 million in extra cap space after renouncing Terrence Jones' cap hold, which allows them to bump Harden's salary up to the maximum for this year and next and then tack on two additional years. Harden had been slated to become a free agent in 2018. Here is Harden's new contract structure.

The move allows Houston to control Harden's future for at least three additional years rather than two, making it easier to construct the team around him after their 2015 Western Conference Finals team fell apart last year. Harden, meanwhile, gets a raise the next two years and can still become a free agent prior to the year he turns 30.