Division of TaxationA capital gain is the profit you realize when you sell or exchange property such as real estate or shares of stock. If you are a New Jersey resident, all of your capital gains, except gains from the sale of exempt obligations, are subject to tax.
When you calculate the gain or loss from each transaction, you can deduct expenses of the sale and your basis in the property. The basis to be used for calculating gain or loss is the cost or adjusted basis used for federal income tax purposes.
³Ô¹ÏºÚÁÏ and federal depreciation and expense deduction limits are different. A ³Ô¹ÏºÚÁÏ depreciation adjustment may be required for assets placed in service on or after January 1, 2004. Complete the Gross Income Tax Depreciation Adjustment Worksheet GIT-DEP to calculate the adjustment.
If you sold an interest in a partnership, a sole proprietorship, or rental property, you may be required to use a ³Ô¹ÏºÚÁÏ adjusted basis. If you sold shares in an S corporation, you must use your New Jersey adjusted basis.
Gains or losses realized from the sale or exchange of exempt obligations such as United States Treasury bonds are not taxable, nor are capital gains distributions from a qualified investment fund attributable to exempt obligations.
Capital gains and losses must be reported in the year they are realized. Gains from installment sales must be reported in the same year that you report them on your federal return. ³Ô¹ÏºÚÁÏ does not differentiate between short-term and long-term capital gains.
There is no distinction between active and passive losses for ³Ô¹ÏºÚÁÏ purposes. You can deduct federal passive losses in full in the year incurred against any gain within the same category of income, but only in the year that it occurred.
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