How New Jersey Taxes Your Crypto

Key Takeaways

New Jersey taxes all crypto gains as ordinary income at NJ's graduated rates (up to 10.75% for income over $1 million). There is no preferential long-term capital gains rate at the NJ level. The holding period distinction only benefits you on the federal return.
NJ does not allow capital loss carryforwards in the crypto disposition category. You can net gains against losses within the same tax year, but if losses exceed gains, the net result is treated as zero on your NJ-1040. No carryback, no carryforward, no offset against wages or other income.
The combined federal + NJ rate on short-term crypto gains can exceed 51% for investors in the top bracket, making every dollar of phantom gain from a blank-basis 1099-DA significantly more expensive.
Form 1099-DA is not part of the Combined Federal/State Filing Program for TY2025. No state revenue department, including NJ's Division of Taxation, automatically received your 1099-DA data this year.
Tax-loss harvesting still works in NJ for TY2025 because wash sale rules do not apply to standard crypto, but the strategy must be optimized around NJ's no-carryforward rule by concentrating gains and losses within the same year.

Most crypto tax content focuses on the federal return. The IRS rules, the new Form 1099-DA, the capital gains rates, the $3,000 loss deduction. It is all federal. Almost none of it tells you what happens when you file your NJ-1040.

New Jersey handles crypto gains fundamentally differently from the federal system. These are not technical footnotes. They are structural gaps that change how much you owe, how losses work, and how much a basis error actually costs you. I have seen national tax preparation chains miss these NJ-specific rules consistently in client files, and the dollar impact is real.

As a CPA based in Livingston, NJ who specializes in cryptocurrency taxation, this is the gap I fill for my clients every filing season. Here is what NJ crypto investors need to understand.

How Does New Jersey Tax Crypto Gains?

New Jersey taxes all capital gains, both short-term and long-term, as ordinary income. There is no preferential rate for long-term holdings at the state level. Crypto gains fall into the "Net gains from disposition of property" category on the NJ-1040 and are taxed at NJ's graduated rate schedule.

At the federal level, long-term capital gains on assets held for more than one year benefit from preferential rates of 0%, 15%, or 20% depending on taxable income, plus the 3.8% Net Investment Income Tax above certain MAGI thresholds. Short-term gains are taxed at ordinary income rates up to 37%.

New Jersey does not make this distinction. A Bitcoin sale that qualifies for the 20% federal long-term rate gets taxed at up to 10.75% in NJ regardless of how long you held it. The only advantage of long-term treatment is on your federal return.

NJ Tax Rate Schedule for TY2025

Per the NJ Division of Taxation published rate schedules for TY2025, NJ's graduated rates reach 10.75% for income over $1 million for both single filers and married filing jointly. Investors below the top bracket still face meaningful state tax on crypto gains. NJ rates start at 1.4% and climb through multiple brackets. The marginal rate on income over $500,000 is significant, and NJ's top rate makes it one of the highest state tax jurisdictions in the country for crypto investors.

What Is the Combined Federal and NJ Tax Rate on Crypto?

For NJ investors at the top of the combined rate structure, the numbers compound substantially:

Short-term crypto gains (top bracket):

Federal ordinary rate: up to 37%

Net Investment Income Tax (above MAGI thresholds): 3.8%

NJ state rate (top bracket): 10.75%

Combined: over 51%

Long-term crypto gains (top bracket):

Federal long-term rate: 20%

Net Investment Income Tax: 3.8%

NJ state rate (top bracket, no preferential rate): 10.75%

Combined: over 34%

Even for NJ investors below the top brackets, the combined federal and state exposure on any phantom gain significantly exceeds the federal rate alone. Every dollar of incorrectly reported or unreconstructed basis on your 1099-DA is taxed at these combined rates.

For a full walkthrough of the 1099-DA basis gap and how phantom gains arise: The 1099-DA $0 Basis Trap: What Crypto Investors and CPAs Need to Know for Tax Year 2025.

Can You Carry Forward Crypto Losses in New Jersey?

No. This is the single most consequential, and least understood, difference between NJ and federal crypto tax treatment.

At the federal level, if your capital losses exceed your capital gains, you can deduct up to $3,000 of net capital loss against ordinary income per year and carry the remainder forward indefinitely to offset future gains.

New Jersey does not allow this for the disposition category.

In NJ, crypto gains and losses both fall into the "Net gains from disposition of property" category on the NJ-1040. Within that category during a single tax year, you can net gains against losses. This is important and frequently misunderstood. NJ does allow within-year netting. If you have $20,000 in gains and $15,000 in losses from dispositions during the same year, your NJ taxable amount from that category is $5,000.

However, if the netting produces an overall loss for the year (if your losses exceed your gains within the category), NJ effectively treats the result as zero on your NJ-1040. Per the NJ Division of Taxation, net losses in this category cannot be carried back or carried forward, and they cannot offset income in any other category such as wages, interest, or dividends. The loss simply does not flow through.

Three Scenarios That Illustrate the NJ Loss Rule

Scenario 1: Net gain within the year:

You have $30,000 in crypto gains and $10,000 in crypto losses during 2025. Your NJ taxable amount from dispositions is $20,000. The within-year netting works as expected.

Scenario 2: Net loss within the year:

You have $10,000 in crypto gains and $30,000 in crypto losses during 2025. Your net loss is $20,000. On your federal return, you deduct $3,000 against ordinary income and carry $17,000 forward. On your NJ return, the disposition category nets to a loss, which NJ treats as zero. You get no deduction against NJ wages or other income, and there is no carryforward. That NJ loss effectively disappears.

Scenario 3: Gains in one year, losses in the next:

You realized $50,000 in crypto gains in 2025 and paid NJ tax on the full amount. In 2026, you realize $50,000 in losses. Federally, the 2026 losses create a $3,000 annual deduction plus a carryforward that can offset future gains including the 2025 gains. In NJ, the 2026 losses net to zero in the disposition category and cannot be carried back or forward. You cannot recover the NJ tax you paid on 2025 gains using 2026 losses.

This asymmetry means NJ investors bear more risk from timing mismatches. Concentrating gains in one year and losses in another produces a strictly worse NJ outcome compared to federal.

Does Tax-Loss Harvesting Work in New Jersey?

Yes, but the strategy needs to be adjusted for NJ's rules.

Within-year harvesting is effective and valuable. If you have realized gains during 2025, harvesting losses before December 31 can offset those gains within the disposition category and reduce your NJ tax. This is the primary NJ use case for loss harvesting, and it works exactly as intended.

Cross-year harvesting has limited NJ value. If you are harvesting losses today to carry forward against future gains, that strategy works federally but produces zero benefit on your NJ return. Losses realized in a year where you have no offsetting gains within the category will net to zero at the NJ level.

Wash sale rules do not apply to standard crypto for TY2025. Bitcoin, Ethereum, and most digital assets are classified as property under IRS guidance, not securities. IRC Section 1091 wash sale rules apply to stocks and securities, not property. You can sell at a loss and immediately repurchase the same asset. This is true for both federal and NJ purposes.

The Lummis amendment to extend wash sale rules to digital assets was not included in the One Big Beautiful Bill Act signed July 4, 2025. Standalone bill S. 2207, introduced June 30, 2025, includes the wash sale extension but has not passed. Wrapped tokens and liquid staking tokens are a fact-specific gray area. Discuss with your CPA.

The NJ planning takeaway: Coordinate your gains and losses within the same tax year whenever possible. Avoid scenarios where you realize gains in one year and plan to offset them with losses in a future year, because the NJ carryforward mechanism does not exist for this income category.

How Does Staking Income Work in New Jersey?

Staking rewards are taxable as ordinary income under Rev. Rul. 2023-14, both federally and in NJ. The income is taxed in the year of receipt.

The NJ complication arises when the value drops between receipt and sale. If you receive staking rewards and the token price decreases before you sell, you have a loss on the disposition. That loss falls into the "Net gains from disposition of property" category, while the original staking income was taxed as ordinary income (a different NJ category).

The result: you paid NJ income tax on the staking rewards when received, and if the disposition loss pushes your disposition category to a net loss for the year, that loss cannot offset the staking income you already paid tax on. The income and the loss exist in different NJ tax categories and do not cross-pollinate.

This is meaningfully different from federal treatment, where capital losses can offset up to $3,000 of ordinary income annually.

For the full list of taxable crypto events not covered by Form 1099-DA, including staking, DeFi, and airdrops: The 5 Crypto Tax Events Your 1099-DA Won't Report (But the IRS Still Expects You To).

Does Form 1099-DA Get Sent to New Jersey?

No. Form 1099-DA is not included in the Combined Federal/State Filing Program (CF/SF) for TY2025. This is a nationwide exclusion for the form's inaugural year, confirmed for TY2025 and subject to change in future years.

The practical result: the NJ Division of Taxation will not automatically receive your 1099-DA data through IRS transmission this year. This does not change your NJ reporting obligation. You must still report all crypto gains and losses on your NJ-1040, but it means NJ's ability to cross-check your state return against broker data is limited for the 2025 filing year.

Keep your records and your NJ return consistent with your federal filing. Any discrepancies between the two create audit risk if the state eventually obtains the data through other channels or in future years when the CF/SF exclusion may be lifted.

What Are the Most Common NJ Crypto Tax Mistakes?

Mistake 1: Assuming NJ Follows Federal Capital Loss Rules

This is the most common and most costly error I see. If your preparer uses the $3,000 loss deduction or loss carryforward on your NJ-1040 for the disposition category, the return is wrong. NJ does not allow either.

Mistake 2: Applying Long-Term Capital Gains Rates at the NJ Level

There is no NJ equivalent of the federal 0%/15%/20% long-term rate. All gains in the disposition category are taxed at NJ's graduated ordinary income rates regardless of holding period. If your tax software or preparer is applying preferential rates to your NJ crypto gains, the calculation is incorrect.

Mistake 3: Ignoring the Compounding Effect of Basis Errors

A phantom gain from a blank-basis 1099-DA hits you twice, once on the federal return and again on the NJ return at up to 10.75%. The combined cost of failing to reconstruct your basis is significantly higher for NJ filers than for residents of lower-tax or no-tax states. For a step-by-step guide to fixing basis errors, see 1099-DA Shows the Wrong Number. Now What? How to Fix Cost Basis Errors on Your 2025 Crypto Tax Return.

Mistake 4: Not Coordinating Gain and Loss Timing for NJ

Because NJ losses do not carry forward, the timing of when you realize gains and losses within a calendar year matters more for NJ than for federal. Investors who plan sales purely around federal optimization may leave NJ value on the table or create worse NJ outcomes.

Mistake 5: Missing Staking and DeFi Income on the NJ Return

If it is income federally, it is income for NJ. Staking rewards, airdrops, and DeFi income that do not appear on your 1099-DA still need to be reported on your NJ-1040.

Mistake 6: Not Accounting for Per-Wallet Basis Tracking on the NJ Return

The Rev. Proc. 2024-28 per-wallet and per-account basis tracking requirement affects your NJ return in the same way it affects your federal return. Basis errors that arise from incorrect wallet-level tracking compound at NJ rates. For the full details: Crypto Cost Basis in 2026: FIFO, Specific ID, and Why Your Wallet History Matters More Than Ever.

How Does NJ Compare to Other States on Crypto Taxes?

NJ's treatment of crypto is notably unfavorable compared to several other states:

States with no income tax: Florida, Texas, Nevada, Wyoming, Washington, Tennessee, South Dakota, New Hampshire (on earned income), and Alaska impose no state-level tax on crypto gains. This is a significant factor in why some high-volume crypto investors relocate.

States with flat rates: States like Illinois (4.95%) and Pennsylvania (3.07%) tax crypto gains but at lower flat rates without NJ's high top bracket.

States that follow federal long-term treatment: Many states that tax capital gains still apply preferential rates for long-term holdings, providing a benefit NJ does not offer.

States with loss carryforward provisions: Most states with an income tax allow some form of capital loss carryforward, making NJ's no-carryforward rule a relative outlier for crypto investors with volatile portfolios.

The NJ combination of high top rates (10.75%), no long-term preferential treatment, and no loss carryforward creates a uniquely unfavorable environment for crypto investors with volatile or actively traded portfolios. It does not mean NJ investors should ignore tax planning. It means the planning needs to specifically account for NJ rules rather than assuming federal treatment carries through.

What Should NJ Crypto Investors Do Now?

Reconstruct basis on every 1099-DA transaction. The basis gap hits you harder in NJ than in most other states due to the high combined rates and no loss carryforward. For a step-by-step guide, see 1099-DA Shows the Wrong Number. Now What? How to Fix Cost Basis Errors on Your 2025 Crypto Tax Return.

Coordinate gains and losses within the same tax year. If you have unrealized losses, consider whether harvesting them in 2025 (before December 31) can offset realized gains within the disposition category. Cross-year strategies do not provide NJ benefit.

Track staking income and DeFi activity separately. Ensure the ordinary income portion is reported on your NJ-1040 even though it will not appear on your 1099-DA.

Verify that your preparer understands NJ crypto treatment. NJ's rules are genuinely unusual, and crypto-specific NJ guidance is sparse. If your preparer is applying federal capital loss carryforward rules to your NJ-1040, your state return needs to be corrected.

Keep your federal and NJ records consistent. With Form 1099-DA excluded from the CF/SF program for TY2025, NJ will not automatically receive your broker data, but inconsistencies between returns create risk.

Consider your cost basis method in light of NJ's rules. Since NJ provides no long-term rate benefit, the FIFO advantage of longer holding periods is purely federal. Specific ID may offer NJ advantages by allowing you to select higher-cost lots. See: Crypto Cost Basis in 2026: FIFO, Specific ID, and Why Your Wallet History Matters More Than Ever.

Frequently Asked Questions About NJ Crypto Taxes

Does New Jersey have a long-term capital gains tax rate for crypto?

No. NJ taxes all capital gains, including crypto, as ordinary income at NJ's graduated rates regardless of holding period. There is no preferential long-term rate at the NJ level.

Can I deduct crypto losses against my NJ wages or salary?

No. Net losses in the "Net gains from disposition of property" category cannot offset income in other NJ categories such as wages, interest, or dividends. If losses exceed gains within the category for the year, the result is treated as zero.

Can I carry forward crypto losses on my NJ return?

No. Per the NJ Division of Taxation, net losses in the disposition category cannot be carried back or carried forward. This is the most significant difference from federal treatment.

Does NJ receive my 1099-DA data?

Not for TY2025. Form 1099-DA is not included in the Combined Federal/State Filing Program for TY2025. This is a nationwide exclusion for the form's inaugural year.

Are staking rewards taxable in New Jersey?

Yes. Staking rewards are taxable as ordinary income in NJ in the year of receipt, the same as federal treatment under Rev. Rul. 2023-14.

What is the highest combined tax rate on crypto in NJ?

For investors in the top brackets, the combined federal (37% ordinary + 3.8% NIIT) and NJ (10.75%) rate on short-term crypto gains exceeds 51%.

Do wash sale rules apply to crypto in NJ for 2025?

No. Standard cryptocurrency is classified as property, not securities. IRC Section 1091 wash sale rules do not apply. This is true for both federal and NJ purposes for TY2025.

Need a NJ CPA Who Understands Crypto Taxes?

NJ's crypto tax rules require someone who knows both the state-specific treatment and the new federal 1099-DA landscape. As a CPA based in Livingston, NJ, I work with crypto investors across New Jersey and nationwide on exactly these issues: accurate basis reconstruction, proper NJ gain and loss netting, and ensuring your federal and state returns are consistent and correct.

If you want your NJ return done right, visit monacocryptotax.com or reach out via DM.

This article is for informational purposes only and does not constitute tax advice. Tax outcomes depend on your specific facts and circumstances.

Greg Monaco, CPA/MBA | NJ CPA License #20CC04711400 | Firm License #20CB00789800 | Crypto Tax: [monacocryptotax.com](https://monacocryptotax.com) | Full-Service CPA: [monacocpa.cpa](https://monacocpa.cpa)

How New Jersey Taxes Your Crypto: A State-by-State Gap That Catches NJ Investors Off Guard