New Jersey taxes capital gains as ordinary income at its regular rates of 1.4% to 10.75%. Unlike the federal system, it has no lower rate for long-term gains. For 2026, the federal government taxes long-term gains at 0%, 15%, or 20%, and higher earners also owe a 3.8% net investment income tax.
Two New Jersey rules surprise many sellers:
- New Jersey does not carry unused capital losses forward to future years.
- New Jersey keeps taxing gains on New Jersey real estate after the owner moves to another state.
Moving before a sale can remove New Jersey tax on stocks and other investments. It does not remove New Jersey tax on a New Jersey home or shore house. The sections below cover the 2026 numbers, worked examples, and the decisions that matter before a sale.
How does the federal government tax capital gains in 2026?
The IRS sorts a gain by how long the asset was held. IRS Topic 409 explains the rules.
- Held more than one year: long-term, taxed at 0%, 15%, or 20%.
- Held one year or less: short-term, taxed at ordinary income rates of 10% to 37%.
For 2026, the IRS set the long-term rate thresholds in Revenue Procedure 2025-32. They are based on total taxable income, including the gain:
- Married filing jointly: 0% up to $98,900; 15% up to $613,700; 20% above $613,700.
- Single: 0% up to $49,450; 15% up to $545,500; 20% above $545,500.
- Head of household: 0% up to $66,200; 15% up to $579,600; 20% above $579,600.
- Married filing separately: 0% up to $49,450; 15% up to $306,850; 20% above $306,850.
Gains stack on top of other income. The IRS fills the brackets with wages, interest, and other ordinary income first, and the gain sits on top. Suppose a married couple has $80,000 of other taxable income. Only $18,900 of their gain can fall in the 0% band, because that is all the room left below $98,900.
Some real estate and collectibles gains have their own rates. When a rental property is sold, the part of the gain that comes from depreciation already claimed is taxed at up to 25%. Gains on collectibles, such as art, coins, and precious metals, are taxed at up to 28%.
Higher earners also owe the net investment income tax. The IRS adds a 3.8% net investment income tax when modified adjusted gross income exceeds these amounts:
- $250,000 for married couples filing jointly
- $200,000 for single filers and heads of household
- $125,000 for married filing separately
These thresholds are set by statute and have not been adjusted for inflation since 2013. The tax applies to whichever is smaller: net investment income, or the amount of income above the threshold. Adding it to the 20% rate puts the top federal rate on long-term gains at 23.8%.
The One Big Beautiful Bill Act, signed in July 2025, did not change the 0%, 15%, and 20% rates. The 2026 thresholds moved only through the annual inflation adjustment (IR-2025-103).
How does New Jersey tax capital gains?
New Jersey taxes all of a resident’s capital gains at the same rates that apply to wages (NJ Division of Taxation — Capital Gains). A stock held for ten years and a stock held for ten days are taxed the same way. The state’s rate schedules run from 1.4% to 10.75%. The brackets that matter most for sellers are:
- 6.37% on taxable income from $150,000 to $500,000 for joint filers, and from $75,000 to $500,000 for single filers.
- 8.97% from $500,000 to $1,000,000 for every filing status.
- 10.75% above $1,000,000 for every filing status.
New Jersey does not index these brackets for inflation. Joint filers reach the 8.97% rate at the same $500,000 as single filers.
New Jersey also has no equivalent of the federal 0% band. A retired couple whose gains fall entirely in the federal 0% bracket still owes New Jersey tax on those gains.
Example: a Monmouth County couple selling stock in 2026. A married couple has $200,000 of wages and sells a stock portfolio with a $300,000 long-term gain. After deductions, they have $170,000 of taxable ordinary income for federal purposes. (Illustrative figures.)
- Federal capital gains tax: The gain stacks from $170,000 to $470,000. All of it falls inside the 15% band, which runs to $613,700, so the tax is $45,000.
- Net investment income tax: Their adjusted gross income is $500,000, which is $250,000 above the threshold. 3.8% of $250,000 is $9,500.
- New Jersey tax: After the property tax deduction and exemptions, their New Jersey taxable income rises from about $183,000 to about $483,000. That entire $300,000 sits in the 6.37% bracket, so the tax is $19,110.
- Total tax on the gain: about $73,610, or roughly 24.5% of the gain. New Jersey accounts for about a quarter of that.
Their adjusted gross income lands just under $505,000. That is the 2026 income level where the [SALT deduction cap begins to shrink](INTERNAL LINK: SALT cap blog). A somewhat larger gain would also reduce their SALT deduction, so the size and timing of a sale affect more than one line of the return.
What happens to capital losses in New Jersey?
This is where New Jersey differs most from federal rules.
Federal rules:
- Capital losses offset capital gains.
- Up to $3,000 of any excess loss offsets ordinary income each year.
- Any remaining loss carries forward to future years with no time limit.
New Jersey rules:
- New Jersey sorts income into separate categories. Gains and losses from selling property can offset each other only within that category, and only in the same year.
- If the category produces a net loss, New Jersey records it as zero.
- The loss cannot reduce wages or other income.
- It does not carry forward to a later year.
Example. An investor realizes a $60,000 net capital loss in 2025 with no gains that year. In 2026, the investor realizes a $60,000 gain.
- Federal: $3,000 of the 2025 loss reduces 2025 ordinary income. The remaining $57,000 carries into 2026 and offsets the gain, leaving a $3,000 net gain.
- New Jersey: The 2025 loss counts as zero and does not carry forward. The full $60,000 gain in 2026 is taxable. At 6.37%, that is about $3,822 of New Jersey tax.
If both sales had happened in the same calendar year, the loss would have offset the gain for New Jersey as well. For New Jersey residents, this makes the calendar year a planning tool. When a large gain is coming, it usually helps to realize available losses in that same year. The federal wash-sale rules still apply to any loss sale.
Does New Jersey tax the sale of a primary home?
New Jersey follows the federal home-sale exclusion. When an owner meets the ownership and use tests in IRS Publication 523, up to $250,000 of gain ($500,000 for married couples filing jointly) is excluded from federal tax. The same amount is excluded from New Jersey tax.
The core test is that the owner owned the home and lived in it for at least two of the five years before the sale.
Gain above the exclusion is taxable at both levels. The federal government taxes it at long-term rates plus the 3.8% net investment income tax, if the seller’s income is above the threshold. New Jersey taxes it at ordinary rates.
Long-time Monmouth County owners often have gains well above $500,000, especially near the shore.
The two-of-five-year test also sets a deadline for owners who move out. A couple who lived in the home until the day they moved generally has three years from the move-out date to sell and still claim the exclusion.
If I move out of New Jersey, which gains does New Jersey still tax?
New Jersey decides this by the type of asset.
New Jersey real estate. Gains on real estate located in New Jersey are New Jersey-source income. New Jersey taxes that gain no matter where the seller lives on the sale date. A former resident reports it on Form NJ-1040NR, the nonresident return.
Stocks, mutual funds, and other investments. New Jersey treats these as intangible property. The state where the seller lives on the date of sale generally taxes the gain. After a genuine move out of New Jersey, gains on investments sold later are generally not taxed by New Jersey.
Example: timing a stock sale around a move. A married couple plans to move to Florida in 2027. They have $150,000 of other income and $500,000 of long-term stock gains.
- Sold in December 2026, as New Jersey residents: The gain adds about $35,750 of New Jersey tax. Their New Jersey tax rises from about $5,510 to about $41,260, because most of the gain falls in the 8.97% bracket.
- Sold after the Florida move is real and complete: New Jersey does not tax the gain.
Federal tax is the same either way. The timing affects only the New Jersey share.
Example: moving first does not change the tax on the family home. A couple bought their Spring Lake home years ago and made improvements. Their adjusted basis is $1,200,000. They move to Florida in March 2026 and sell in July 2026 for a net $2,500,000.
- Gain: $1,300,000.
- Exclusion: $500,000, leaving an $800,000 taxable gain.
- New Jersey: The home is New Jersey real estate, so New Jersey taxes the $800,000 even though the couple now lives in Florida. If this were their only income for the year, New Jersey’s rate schedule produces about $54,700.
- Federal: On the same assumption, federal capital gains tax is about $108,000 and the net investment income tax is about $20,900.
The move changed where they live. It did not change who taxes the house.
What makes a move count for New Jersey?
New Jersey treats a person as a resident for tax purposes in either of these cases:
- New Jersey is the person’s domicile, meaning their true permanent home.
- The person keeps a permanent home in New Jersey and spends more than 183 days in the state during the year.
In the year of a move, a part-year resident files Form NJ-1040 for the months of residence. The same person may also need to file Form NJ-1040NR for New Jersey-source income earned after the move.
When New Jersey reviews a claimed change of domicile, it looks at objective evidence:
- driver’s license and vehicle registration
- voter registration
- the address on federal tax returns
- where the person spends their time
- where family and doctors are located
- whether a New Jersey home is kept
A Florida driver’s license alone does not establish a new domicile. It is also important to document the move date, because gains realized before that date remain New Jersey income.
What is the New Jersey “exit tax” at closing?
New Jersey does not have an exit tax. The term refers to an estimated income tax payment that New Jersey collects at closing when a nonresident sells New Jersey real estate. The rules are set out in the Division of Taxation’s GIT/REP FAQs and on Form GIT/REP-1.
How the payment is calculated. The payment equals the federal gain multiplied by New Jersey’s top rate of 10.75%. It cannot be less than 2% of the sale price. The 2% minimum applies even when the sale produces no gain.
Sellers who don’t make the payment. On Form GIT/REP-3, a seller can certify an exemption from the payment. The main exemptions are:
- The seller is a New Jersey resident.
- The property was the seller’s principal residence under the federal home-sale exclusion.
- The sale is part of a qualifying Section 1031 exchange.
An exemption removes the payment at closing. It does not remove the tax. Any gain above the exclusion still goes on the seller’s New Jersey return.
The payment is a prepayment, not the final tax. The actual tax is calculated on the nonresident return using New Jersey’s graduated rates. Most sellers owe less than the amount collected at closing.
Example: a shore house sold after moving to Florida. A couple moved to Florida in 2025 and kept their Belmar shore house as a second home. It was never rented, so there is no depreciation. In 2026 they sell it for $900,000. Their adjusted basis is $400,000, so the gain is $500,000. Their other income for 2026, all from Florida, is $150,000.
- Collected at closing: 10.75% of $500,000 is $53,750. That is more than the 2% minimum of $18,000, so the settlement agent collects $53,750.
- Actual New Jersey tax: On the nonresident return, New Jersey calculates the tax on all $650,000 of income, which is about $41,260. It then applies only the New Jersey share, $500,000 out of $650,000. The result is about $31,740.
- Overpayment: about $22,000.
The couple can request that money back when they file the nonresident return. They can also request it right after closing with Form A-3128, a claim for refund of the estimated payment. The refund claim needs the settlement statement and records of the purchase price and improvements, so those documents should be gathered before closing.
Which states don’t tax capital gains?
For 2026, these states have no broad personal income tax that reaches capital gains: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming.
Official sources for the states that most often come up:
- Florida: The Florida Department of Revenue confirms that Florida does not impose a personal income tax. Florida is the most common destination for New Jersey residents who relocate.
- New Hampshire: New Hampshire repealed its interest and dividends tax for tax periods beginning January 1, 2025 (NH Department of Revenue Administration). It never taxed capital gains.
- Tennessee: Tennessee fully repealed its Hall income tax on investment income starting with 2021 (Tennessee Department of Revenue).
- Washington: Washington does not tax wages. It does impose a capital gains excise tax: 7% on long-term gains above an annual deduction ($278,000 for 2025, adjusted each year for inflation), plus an additional 2.9% on taxable gains above $1 million (Washington Department of Revenue; tiered rates notice). Sales of real estate are exempt from that tax.
A lower-tax state helps only with gains New Jersey cannot claim as New Jersey-source income. For a household whose largest asset is a New Jersey home or rental property, the new state’s tax rate does not change New Jersey’s tax on that property.
Should I sell appreciated property now or leave it to my heirs?
For owners later in life, holding an asset can be worth more than selling it. When an asset passes at death, the heir’s basis generally resets to its fair market value on the date of death (IRS Publication 551). The gain that built up during the owner’s lifetime is not taxed as income, federally or by New Jersey.
New Jersey repealed its estate tax for deaths on or after January 1, 2018. It still has an inheritance tax, but spouses, children, and grandchildren (Class A beneficiaries) are exempt from it (NJ Division of Taxation — Inheritance and Estate Tax).
For a long-held Monmouth County home or portfolio, the choice between selling now and holding depends on three things:
- the owner’s need for the cash
- the size of the gain
- which heirs will receive the asset
That decision belongs in [wealth transfer planning](INTERNAL LINK: /services/wealth-transfer/) before anything is listed for sale.
What to decide before a sale, based on your situation
Staying in New Jersey and selling investments:
- Project total 2026 income, including the gain, against three thresholds: the federal 15%/20% threshold ($613,700 joint), the net investment income tax threshold ($250,000 joint), and the New Jersey 8.97% bracket ($500,000).
- Realize available losses in the same calendar year as the gains, since New Jersey will not carry them forward.
Planning a move out of New Jersey:
- Put stock and fund sales after the move date where the numbers support it.
- Document the change of domicile.
- Plan on New Jersey continuing to tax any New Jersey real estate sold later.
Selling a primary home:
- Confirm the two-of-five-year test.
- If already moved out, sell within three years of the move to keep the exclusion.
- Gather records of improvements to support the basis, since gain above $250,000 or $500,000 is taxed by both New Jersey and the federal government.
Selling a New Jersey shore house or rental after moving:
- Expect the estimated payment at closing to be larger than the final tax in most cases.
- Prepare Form A-3128 and the basis records to recover the difference quickly.
- For a rental, account for depreciation recapture, which is taxed at up to 25% federally.
Owners considering whether to sell or hold for heirs:
- Compare the tax on selling now with the basis reset at death before listing.
Each of these decisions depends on the size of the gain, the timing, and where the seller will live on the sale date. We model those numbers in a tax-planning consultation, before the sale is on the calendar.
Sources
- Internal Revenue Service — Revenue Procedure 2025-32 (2026 inflation adjustments) — https://www.irs.gov/pub/irs-drop/rp-25-32.pdf
- Internal Revenue Service — IR-2025-103, tax year 2026 inflation adjustments including One Big Beautiful Bill amendments — https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill
- Internal Revenue Service — Topic 409, Capital gains and losses — https://www.irs.gov/taxtopics/tc409
- Internal Revenue Service — Net Investment Income Tax — https://www.irs.gov/individuals/net-investment-income-tax
- Internal Revenue Service — Publication 523, Selling Your Home — https://www.irs.gov/publications/p523
- Internal Revenue Service — Publication 551, Basis of Assets — https://www.irs.gov/publications/p551
- NJ Division of Taxation — Income Tax: Capital Gains — https://www.nj.gov/treasury/taxation/njit9.shtml
- NJ Division of Taxation — Tax Rate Schedules — https://www.nj.gov/treasury/taxation/pdf/current/njtaxratesch.pdf
- NJ Division of Taxation — GIT/REP FAQs — https://www.nj.gov/treasury/taxation/gitrepfaqs.shtml
- NJ Division of Taxation — Forms GIT/REP-1 and GIT/REP-3 — https://www.nj.gov/treasury/taxation/pdf/other_forms/tgi-ee/gitrep1.pdf ; https://www.nj.gov/treasury/taxation/pdf/other_forms/tgi-ee/gitrep3.pdf
- NJ Division of Taxation — Inheritance and Estate Tax — https://www.nj.gov/treasury/taxation/inheritance-estate/
- Florida Department of Revenue — Personal income tax FAQ — https://floridarevenue.com/faq/Pages/FAQDetails.aspx?FAQID=1466
- New Hampshire Department of Revenue Administration — 2023 legislative changes (I&D tax repeal) — https://www.revenue.nh.gov/documents/2023-003.pdf
- Tennessee Department of Revenue — Hall Income Tax — https://www.tn.gov/revenue/taxes/hall-income-tax.html
- Washington Department of Revenue — Capital gains tax; New tiered rates — https://dor.wa.gov/taxes-rates/other-taxes/capital-gains-tax ; https://dor.wa.gov/forms-publications/publications-subject/special-notices/new-tiered-rates-washingtons-capital-gains-tax
