The news was first reported by Cleveland.com.
The Cavs have been looking to trade Smith since November because only a portion of his $15.6 million for next year is guaranteed. The team worked out a deal with Smith to extend his guarantee date from June 30 to July 15, boosting his guarantee from $3.9 million to $4.4 million, but were unable to find a deal.
By waiving and stretching the guaranteed money, the Cavs will move below the luxury tax for the 2019-20 season.
Smith, 33, played in only 11 games last season, agreeing to leave the team last November to await a trade or release. The 15-year veteran is a career 37 percent 3-point shooter.