In New Jersey, Gross Income Tax is levied on gross income (rather than net income) earned or received by New Jersey resident and nonresident individuals. (N.J. Stat. Ann. 5 54A:1-1 to: 9-28).
Losses are not reported on Form NJ-1040.
That said, within the same category of income, losses can be netted against gains. So, for example, gambling losses can be subtracted from gambling winnings during the tax year. Or, on Form NJ-BUS-1, a loss on rental property can offset the gain on another rental property, or loss from one partnership can offset the gain from another partnership.
A loss in one category of income cannot be netted against income or gains in a different category. So, for example, gambling losses cannot be subtracted from wages.
Additionally, for New Jersey purposes there is no distinction between passive and nonpassive losses, and losses are neither carried back nor forward, including capital losses and net operating losses. The exception is that if any of the four parts of NJ-BUS-1 calculates an overall loss, the loss can be carried forward on Form NJ-BUS-2 for up to 20 years.
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