The defensive lineman, who was the unanimous choice as NFL Defensive Player of the Year in 2014, has restructured his contract to free up $8 million of salary-cap room for the Texans, a league source told ESPN's Field Yates on Tuesday.
Watt, according to the source, has agreed to turn a $10 million roster bonus he was due into a signing bonus, which creates cap space for the Texans for the 2015 season.
In his fourth pro season, Watt had 20.5 sacks, 78 tackles (29 for losses), 50 quarterback hits, four forced fumbles and 10 blocked passes. He signed a six-year deal prior to the 2014 season that could pay him $100 million.
He is the first NFL player with multiple 20-sack seasons. Watt also had 20.5 sacks in 2012, his other top defensive player season.