Does NJ have a preferential capital gains rate for crypto?

No. NJ taxes all capital gains as ordinary income, up to 10.75%. There is no long-term capital gains benefit in New Jersey.

What is Form 1099-DA?

Form 1099-DA is the new IRS broker reporting form for cryptocurrency. Starting in 2026, exchanges must report both proceeds and cost basis. Without accurate records, the IRS may assume your cost basis is zero.

2026 Crypto Taxes for NJ Investors: The Year Enforcement Gets Real

Q: Can crypto losses offset real estate gains in NJ?

No. Crypto falls into Category C (intangible property). Crypto losses can only offset other Category C gains, not real estate (Category A) or employer stock (Category B).

Q: What is per-wallet tracking for crypto?

As of January 1, 2025, you can no longer use universal cost basis methods that pool assets across wallets. Each wallet must track its own cost basis separately.

Gregory Monaco, CPA
Jan 2
2 min read

2026 Crypto Taxes for NJ Investors blog post header with Monaco CPA branding in navy blue and gold, explaining IRS enforcement changes for cryptocurrency investors — 2026 marks the first year the IRS will have your crypto transaction data before you do. Form 1099-DA, per-wallet tracking rules, and AI-driven blockchain monitoring create new compliance challenges for NJ investors.

Last Updated: January 2, 2026

Quick Summary

TL;DR: 2026 is the first year where the IRS will have your crypto transaction data before you do, thanks to Form 1099-DA. Combine this with per-wallet cost-basis rules, AI-driven blockchain monitoring, and NJ treating all crypto gains as ordinary income—and it's a recipe for CP2000 notices for anyone with more than one wallet. Livingston, Newark, and Jersey City—all high-adoption areas—will be hit first.

The 2026 Crypto Audit Triggers

IRS machine-learning systems now flag these patterns:

Transfers from self-custody to exchanges
Coinbase/Kraken reporting proceeds with no cost basis
DeFi swaps not reported on any platform
NFT purchases using ETH from mixed wallets
Staking, validator, bridging rewards not aggregated
Multi-chain activity (ETH, SOL, L2s)
Missing cost basis reconstruction
1099-DA mismatch with 8949

Per-Wallet Tracking Is Now Mandatory

As of January 1, 2025, you can no longer use "universal" cost basis methods that pool assets across wallets. The IRS now requires per-wallet tracking:

When you sell from Coinbase, you use cost basis from Coinbase holdings
Transfers between wallets must be documented to prove continuity
Without documentation, receiving exchanges default to zero basis

See our Wallet-by-Wallet Cost Basis Guide for details.

Form 1099-DA: The New Broker Reporting

2025 Transactions: Gross Proceeds Only

For sales in 2025, brokers report only gross proceeds. They won't report cost basis.

2026 Onward: Cost Basis Included

Starting with 2026 transactions, brokers must report both proceeds AND cost basis.

The "Data Gap" Problem

The IRS receives a 1099-DA showing you sold $100,000 of crypto. If you don't accurately report your cost basis, the IRS automated matching program may assume your basis is zero.

Related: Form 1099-DA Explained

Basis Reconstruction Framework

If you use more than 3 wallets, you need:

Full transaction exports for each chain
Bridging history (the #1 omission)
LP token acquisition + redemption logs
Internal transfers labeling
Staking reward timestamps
NFT cost basis (ETH equivalency at time of purchase)

NJ-Specific Considerations

No Preferential Rate

NJ taxes all capital gains as ordinary income—up to 10.75%. No long-term capital gains benefit.

Category Rules

Crypto falls into Category C (intangible property). Crypto losses can only offset other Category C gains—not real estate (Category A) or employer stock (Category B).