Mozgov, 33, was acquired in July 2018 by the Magic as part of a three-team trade, but he never played for the club because of a knee injury. He was waived last summer and has since returned to play in Russia.
The Magic will go from $2.3 million below the tax threshold to $7.8 million below. They have a $10.7 million buffer on the hard cap.
The news was first reported by The Athletic.
ESPN's Bobby Marks contributed to this report.