Greg was recently quoted in [GOBankingRates](https://monacocpa.cpa/press), [Yahoo Finance](https://monacocpa.cpa/press), and [Better.com](https://monacocpa.cpa/press) on cryptocurrency taxation.

Why Livingston Crypto Investors Face a Unique Tax Position

Most crypto tax content is written for a national audience and focuses almost entirely on the federal return. The IRS rules, the new Form 1099-DA, the capital gains brackets, the $3,000 loss deduction. It is all federal, and almost none of it tells you what happens when you file your NJ-1040.

That gap matters more in Livingston than in most places.

Livingston sits in Essex County, one of New Jersey's most densely populated counties. The township is a commuter community with deep ties to Manhattan's financial services, technology, and professional services industries. Many residents earn well above NJ's higher marginal tax brackets, and a meaningful share hold or trade digital assets as part of broader investment portfolios.

The combination of NJ's high state tax rates, the absence of a long-term capital gains preference, the no-carryforward rule on disposition losses, and the high household incomes typical of the Livingston area creates a crypto tax environment that is structurally more punishing than what investors face in most other states. A Livingston resident trading the same portfolio as someone in Florida, Texas, or even Pennsylvania will pay meaningfully more in state taxes on the same gains, and will have fewer tools to offset losses.

I practice from Livingston, and every filing season these NJ-specific issues show up in local client files. The dollar amounts are not trivial. This article is the guide I wish existed when I started specializing in NJ crypto tax work.

How Does NJ Tax Crypto Differently Than the Federal System?

There are three structural differences between NJ and federal crypto tax treatment, and each one changes how much you owe.

No long-term capital gains rate. At the federal level, long-term gains on assets held for more than one year qualify for preferential rates of 0%, 15%, or 20% depending on taxable income, plus the 3.8% Net Investment Income Tax above certain MAGI thresholds. New Jersey makes no such distinction. Per the NJ-1040 instructions for TY2025, all crypto gains fall into the "Net gains from disposition of property" category under N.J.S.A. 54A:5-1 and are taxed at NJ's graduated ordinary income rates regardless of how long you held the asset. The top NJ rate is 10.75% for income over $1 million for both single and married filing jointly.

A Livingston investor who held Bitcoin for three years and sells at a long-term gain pays 20% federally (plus 3.8% NIIT if applicable). That same gain is taxed at up to 10.75% in NJ. The holding period saved you federal dollars. It saved you nothing on your state return.

No loss carryforward in the disposition category. This is the rule that catches the most people. Federally, if your capital losses exceed your capital gains, you can deduct up to $3,000 of net capital loss against ordinary income and carry the remainder forward indefinitely. NJ does not allow this for the disposition category. Per the NJ-1040 instructions for TY2025, crypto gains and losses fall into the "Net gains from disposition of property" category under N.J.S.A. 54A:5-1. Within a single tax year, you can net gains against losses within the category. But if the result is a net loss, NJ treats it as zero. No deduction against wages, interest, or dividends. No carryforward to future years. No carryback. The loss effectively disappears from your NJ return.

New Jersey is one of a limited number of states that does not allow capital loss carryforwards in the disposition of property category. NJ's no-carryforward rule makes it a national outlier for crypto investors with volatile portfolios.

For the full technical breakdown of NJ's loss rules with worked scenarios, see: How New Jersey Taxes Your Crypto: A State-by-State Gap That Catches NJ Investors Off Guard.

No cross-category loss offset. If you receive staking rewards -- taxable as ordinary income federally under Rev. Rul. 2023-14, and as ordinary income in NJ -- and later sell the tokens at a loss, the original income and the subsequent loss live in different NJ tax categories under the NJ gross income tax structure (N.J.S.A. 54A:5-1). Under NJ's category-based income structure, the disposition loss cannot offset the staking income you already paid NJ tax on, even within the same year.

The Essex County Income Problem: Why NJ Rates Hit Harder Here

NJ's crypto tax exposure is not evenly distributed across the state. It hits harder in higher-income areas, and Livingston is one of them.

Essex County as a whole has significant income diversity -- the county-wide median household income actually falls below the NJ state median. But Livingston's median household income sits well above the state figure. This township-level distinction matters because NJ's tax rates are graduated. As your income increases, each additional dollar of crypto gain is taxed at a higher marginal rate. For a Livingston household already earning above $500,000 from employment or business income, every dollar of crypto gain is being taxed at or near NJ's top brackets from the first dollar.

This is compounded by the phantom gain problem created by the new Form 1099-DA. When basis is blank or $0 on your 1099-DA and you file without correcting it, the IRS and NJ both treat the full proceeds as gain.

As of TY2025, a Livingston crypto investor in the top combined bracket faces a marginal rate of approximately 51.55% on short-term crypto gains (37% federal ordinary rate + 3.8% Net Investment Income Tax + 10.75% NJ) and approximately 34.55% on long-term crypto gains (20% federal long-term rate + 3.8% NIIT + 10.75% NJ). The NJ component is identical in both cases because NJ provides no preferential long-term rate.

For a Livingston filer at those combined rates, phantom gain from an unreconstructed 1099-DA basis is taxed at over 51 cents on the dollar. The cost of not reconstructing your basis is higher here than in almost any other zip code in the country.

One note on the SALT deduction cap: the One Big Beautiful Bill Act (signed July 2025) raised the SALT cap to $40,000 for married filing jointly ($20,000 MFS) for TY2025, but the benefit phases down for filers with modified AGI above $500,000 (reduced by $0.30 per dollar over $500,000, floor of $10,000). For most Livingston filers in the income brackets discussed in this article, the phasedown significantly reduces the effective cap, and NJ property taxes alone can consume most or all of the available deduction. The combined rate figures above represent the marginal rates on each additional dollar of crypto gain, and for most high-income Livingston households the SALT cap does not materially change the effective marginal rate on crypto income.

For a step-by-step guide to fixing basis errors on your 1099-DA: 1099-DA Shows the Wrong Number. Now What? How to Fix Cost Basis Errors on Your 2025 Crypto Tax Return.

What NYC Commuters in Livingston Need to Know About Multi-State Crypto Tax

A substantial portion of Livingston residents commute to New York City for work. If you earn W-2 or 1099 income sourced to New York and also have crypto gains, the multi-state interaction creates both planning opportunities and traps.

The baseline rule. NJ residents are taxed on all worldwide income, including crypto gains, regardless of where the transactions occurred. New York also taxes its residents on all income, but NJ residents who work in NY are not NY residents. They are NY nonresidents, taxed by NY only on NY-sourced income. Investment income like crypto gains is generally not NY-sourced for a NJ resident, meaning most crypto gains are taxed by NJ and not by NY.

The credit for taxes paid to other states. NJ allows a credit against NJ tax for taxes paid to other states on the same income. For Livingston commuters, this primarily applies to the NY taxes paid on your NY-sourced wages or business income. The credit reduces your NJ tax, but the mechanics matter. The credit is calculated category by category and cannot exceed the NJ tax otherwise due. Crypto gains are typically only in the NJ column, so they receive no multi-state credit benefit.

The planning angle. Because crypto gains are generally taxed only by NJ (not NY), the marginal cost of crypto gains for Livingston commuters is driven entirely by NJ's rate schedule. This is important because it means NJ's no-carryforward rule and no-long-term-rate rule apply to the full crypto gain without any offsetting benefit from the multi-state credit. Livingston commuters should plan their crypto gain and loss timing around NJ rules specifically, not around federal or multi-state optimization.

The telecommuting complication. Post-2020 remote work has created ambiguity around NY sourcing for some Livingston residents. If you are working from home in Livingston for a NY employer, the NY "convenience of the employer" rule may still source some of your income to NY. The NJ-NY reciprocity and credit calculations interact with your overall NJ tax picture, which in turn affects how much headroom you have in NJ's graduated brackets before crypto gains push you into higher marginal rates.

The bottom line for Livingston commuters: your crypto tax planning is a NJ planning exercise. Optimize around NJ's rules, not NY's. For more on how the convenience-of-the-employer rule and NJ-NY multi-state filing affect Livingston remote workers, see: Working from Home in Livingston? Tax Deductions NJ Residents Often Miss.

How Does the New Form 1099-DA Interact With Your NJ Return?

Form 1099-DA is being issued for the first time for Tax Year 2025, and it creates specific problems at the NJ level that go beyond the federal issues.

Basis is voluntary for TY2025. Brokers are required to report gross proceeds but are not required to report cost basis for sales effected in 2025. This means most 1099-DAs show proceeds with blank or $0 basis. For the comprehensive walkthrough: The 1099-DA $0 Basis Trap: What Crypto Investors and CPAs Need to Know for Tax Year 2025.

NJ amplifies the basis gap. Every dollar of phantom gain (unreconstructed basis that should have been reported) gets taxed twice: once on your federal return and again on your NJ-1040 at up to 10.75%. For a Livingston filer in the top combined bracket, the cost of not fixing your basis on a single transaction can exceed 51% of the phantom gain amount. Across a year of active trading, the aggregate cost of unrecovered basis is substantial.

Form 1099-DA is not in the Combined Federal/State Filing Program for TY2025. This is a nationwide exclusion for the form's inaugural year. The practical result is that the NJ Division of Taxation did not automatically receive your 1099-DA data for TY2025 through IRS transmission. 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.

Do not treat the CF/SF exclusion as a reason to underreport. The exclusion is for the first year only and is subject to change. NJ may eventually obtain this data through other channels, and inconsistencies between your federal and NJ returns create audit risk in any year.

NJ is adding a digital asset disclosure question for TY2025. The NJ Division of Taxation announced that the NJ-1040 for Tax Year 2025 will require filers to disclose whether they engage in or hold digital assets -- similar to the virtual currency question that has appeared on the federal Form 1040. This does not change your substantive reporting obligations, but it means NJ is actively building a database of crypto holders and the question must be answered accurately.

Does Tax-Loss Harvesting Still Work for Livingston Investors?

Yes, and for NJ residents it is arguably more important to execute correctly than for investors in most other states. The strategy just needs to be calibrated for NJ's rules. The TY2025 harvesting window closed December 31, 2025, but the mechanics below apply every year and are critical for TY2026 planning.

Within-year harvesting is fully effective. If you realized crypto gains during 2025 and harvested losses before December 31, those losses offset gains within the disposition category on your NJ-1040. This reduces your NJ tax dollar for dollar on the offset amount. The same principle applies for TY2026.

Cross-year harvesting has zero NJ benefit. If you harvest losses in a year where you have no offsetting gains within the disposition category, those losses net to zero at the NJ level. They disappear. Federally, the losses create a carryforward. In NJ, they do not. This is the most important tactical difference for Livingston investors: if your goal is NJ tax savings, every loss must be matched with a gain in the same calendar year.

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 without triggering a wash sale, 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 harvesting playbook for Livingston investors (applies every tax year):

  1. Review your realized gains and losses quarterly, not just in December. NJ's no-carryforward rule makes timing critical.
  2. If you have gains and unrealized losses in the same year, harvest the losses before year-end to offset within the NJ disposition category.
  3. If you have only losses and no gains in a given year, the NJ benefit of harvesting is zero. The losses will net to zero on your NJ-1040 regardless. You may still harvest for federal carryforward purposes, but know that NJ gets nothing from it.
  4. If you have large realized gains in Q1-Q3 and the market drops in Q4, the harvesting window is both urgent and valuable for NJ purposes. Do not wait until late December.

The Timing Trap: Why NJ's Loss Rules Demand a Different Calendar Strategy

The no-carryforward rule creates a timing dynamic for NJ that does not exist at the federal level. I see this pattern frequently in client files from the Livingston area, especially among investors who trade actively alongside full-time employment.

The common mistake. An investor realizes $80,000 in crypto gains in 2025, pays NJ tax on the full amount, and then in early 2026 the market turns and they realize $80,000 in losses. Federally, the 2026 losses create a $3,000 annual deduction against ordinary income plus a $77,000 carryforward that can offset future gains. In NJ, the 2026 losses net to zero in the disposition category. No carryforward, no carryback, no offset against the 2025 gains that were already taxed. The NJ tax paid on 2025 gains is not recoverable through 2026 losses.

The NJ-optimized approach. Coordinate your gain and loss realization within the same calendar year whenever possible. If you had large unrealized gains and large unrealized losses at any point during 2025, realizing both in the same year would have produced a better NJ outcome than splitting them across years. The same logic applies to TY2026 planning.

The December 31 deadline is hard -- every year. NJ's disposition category resets at year-end. There is no grace period, no extension, no flexibility. For TY2025, the window closed December 31, 2025. For TY2026 planning, the same deadline applies. If you intend to harvest a loss to offset a current-year gain at the NJ level, the sale must be completed by December 31 of that year.

What About Staking, DeFi, and Airdrops on Your NJ-1040?

If it is income federally, it is income for NJ. This is the baseline rule that applies to every category of crypto income beyond simple buy-and-sell transactions.

Staking rewards are taxable as ordinary income in the year of receipt under Rev. Rul. 2023-14, both federally and in NJ. Brokers are not required to report certain staking-related transaction structures on Form 1099-DA for TY2025 under Notice 2024-57, and staking rewards themselves are not reported on 1099-DA regardless. Your obligation to report this income on your NJ-1040 is not reduced by the absence of a form.

DeFi income including yield farming, liquidity pool rewards, and lending interest is taxable. The DeFi broker reporting rule (T.D. 10021) was repealed by Congress via the Congressional Review Act (H.J.Res.25, signed April 10, 2025). This repeal relates to the non-custodial DeFi "trading front-end services" rule and does not eliminate your obligation to report DeFi income.

Airdrops are taxable as ordinary income at the fair market value at the time of receipt. The NJ treatment follows federal treatment.

The NJ complication for all of the above: When tokens received as staking rewards, DeFi income, or airdrops are later sold at a loss, that loss falls into the disposition category while the original income was taxed in a different NJ category (ordinary income). The loss cannot offset the income across categories. This asymmetry is particularly painful for Livingston investors in higher tax brackets. For the full details on crypto tax events not covered by 1099-DA: The 5 Crypto Tax Events Your 1099-DA Won't Report (But the IRS Still Expects You To).

The Virtual CPA Question: Why Location Still Matters for NJ Crypto Tax

Crypto tax preparation has gone national. There are firms and platforms that will handle your federal crypto return from anywhere. But NJ state tax is where location-specific knowledge becomes critical.

NJ's crypto tax rules are genuinely unusual. The no-carryforward rule, the no-long-term-rate treatment, the category-specific loss netting, the NJ-NY commuter credit interaction, the CF/SF exclusion for 1099-DA. These are not items that a generalist tax preparer or a national crypto tax platform is necessarily built to handle. I have reviewed returns prepared by both national chains and crypto-focused platforms where the NJ-1040 applied federal capital loss carryforward rules that NJ does not allow. The resulting understatement of NJ tax is a real compliance risk.

A CPA who understands both the federal crypto landscape and NJ's specific rules is the combination that matters.

Your 2025 NJ Crypto Tax Checklist: Livingston Edition

  • Basis reconstruction. Reconstruct cost basis for every 1099-DA transaction showing blank or $0 basis. Download full transaction history CSVs from every exchange. Pull on-chain records for self-custody wallets. Match each sale to its acquisition lot. For the step-by-step process: 1099-DA Shows the Wrong Number. Now What?
  • Per-wallet basis tracking. Confirm your basis is tracked per wallet and per account under Rev. Proc. 2024-28. You can no longer aggregate basis across platforms. See: Crypto Cost Basis in 2026: FIFO, Specific ID, and Why Your Wallet History Matters More Than Ever
  • NJ disposition category netting. Calculate your net gain or loss within the "Net gains from disposition of property" category per N.J.S.A. 54A:5-1. Net all crypto gains against all crypto losses within 2025. If the result is a net gain, that is your NJ taxable amount from dispositions. If the result is a net loss, the NJ amount is zero with no carryforward.
  • Staking, DeFi, and airdrop income. Identify all crypto income events separate from dispositions. Staking rewards, DeFi yields, airdrops, and mining income are all reportable on your NJ-1040 as ordinary income in the year of receipt, regardless of whether you received an information return.
  • NJ-NY credit calculation (if applicable). If you earned NY-sourced income during 2025, calculate the NJ credit for taxes paid to New York. Verify that your crypto gains are properly excluded from NY-sourced income and that the credit calculation is applied correctly.
  • Loss harvesting review. For TY2025, the harvesting window closed December 31, 2025. Verify that any losses harvested before year-end are properly netted against 2025 gains within the NJ disposition category. For TY2026, begin tracking unrealized gains and losses now so you can harvest strategically before year-end.
  • Federal-NJ consistency. Verify that your NJ-1040 and federal return are consistent. Different basis figures, different gain amounts, or different treatment of losses between the two returns creates audit risk.
  • NJ digital asset disclosure. Answer the new NJ-1040 digital asset question accurately. For TY2025, NJ is requiring filers to disclose whether they engage in or hold digital assets.
  • Record retention. Keep all exchange CSVs, transfer records, on-chain documentation, cost basis calculations, and both the 1099-DA and your return for a minimum of three years from the filing date (six years if gross income was understated by more than 25%, indefinitely for fraud or failure to file).

Frequently Asked Questions

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

No. The NJ crypto tax rate is the same for short-term and long-term holdings. NJ taxes all capital gains, including crypto, as ordinary income at NJ's graduated rates regardless of holding period. The top NJ rate is 10.75% for income over $1 million. The long-term distinction only benefits you on your federal return.

Can I deduct crypto losses against my NJ wages?

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.

Why does Livingston location matter for crypto taxes?

Livingston is in Essex County, but unlike the county-wide median, Livingston's median household income sits well above the NJ state figure. Higher household income means more of your crypto gains are taxed at NJ's upper marginal brackets. The township's proximity to NYC also means many residents have multi-state filing complexity from NY-sourced employment income. And NJ's uniquely unfavorable crypto loss rules hit higher-income investors disproportionately hard.

Will NJ receive my 1099-DA data?

Not for TY2025. Form 1099-DA is excluded from the Combined Federal/State Filing Program for TY2025 nationwide. No state revenue department, including NJ's Division of Taxation, automatically received your 1099-DA data for the 2025 tax year. This does not change your reporting obligation.

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. The Lummis amendment to extend wash sale rules to digital assets has not passed.

What is the highest combined tax rate on crypto for a Livingston investor?

For investors in the top brackets, the combined New Jersey cryptocurrency tax rate on short-term gains is approximately 51.55%: federal ordinary rate (37%) + Net Investment Income Tax (3.8%) + NJ state rate (10.75%). For long-term gains, the combined rate is approximately 34.55%: federal long-term rate (20%) + NIIT (3.8%) + NJ state rate (10.75%). NJ provides no preferential long-term treatment, so the 10.75% NJ component applies regardless of holding period.

Should I use FIFO or Specific Identification for NJ purposes?

Since NJ provides no long-term rate benefit, the FIFO advantage of naturally selecting older (long-term) lots is purely federal. Specific Identification may offer NJ advantages by allowing you to select higher-cost lots, reducing the gain on your NJ return. The optimal method depends on your specific portfolio and transaction history. Discuss with your CPA.

I moved to NJ from a no-tax state during 2025. How does that affect my crypto taxes?

NJ taxes you as a resident for the portion of the year you lived in NJ. Crypto gains realized during your NJ residency period are subject to NJ tax. Gains realized before you became a NJ resident are generally not. The calculation requires a part-year NJ-1040 and careful dating of each disposition.

Key Takeaway

NJ's crypto tax rules are structurally more punishing than most states: no long-term rate, no loss carryforward, no cross-category offset, and graduated rates up to 10.75%. For Livingston investors in high-income brackets, the combined federal-plus-NJ marginal rate on short-term crypto gains exceeds 51%. Every basis error, every missed harvesting window, and every cross-year loss mismatch costs more here than almost anywhere else. Get your NJ return right.

Related reading: How NJ Taxes Your Crypto | The 1099-DA $0 Basis Trap | How to Fix Cost Basis Errors | 5 Crypto Tax Events Your 1099-DA Won't Report | Crypto Cost Basis Methods | Essex County Property Tax Guide | Crypto tax services