Arizona's 2025 Form 140 instructions allow a subtraction of 25% of net long-term capital gain from assets acquired after December 31, 2011, and tax the remaining taxable income at 2.5%.
The provision uses general asset conditions rather than expressly approving crypto sales.
When the acquisition date cannot be determined, the instructions treat the asset as acquired before January 1, 2012, and that gain drops out of the subtraction.
This page sits under our crypto taxes by state hub, which handles the federal-first order these state rules ride on.
What is different in Arizona
The date condition comes first, because it decides whether anything else matters.
The 2025 Form 140 handles gains through individual income tax: your gain arrives through federal adjusted gross income, and lines 20 through 24 allow you to subtract a quarter of the qualifying net long-term capital gain.
A quarter of the gain, not a quarter of the tax.
Only long-term gain reaches that worksheet, and only from assets acquired after December 31, 2011. Short-term gain does not receive this subtraction. The instructions tax Arizona-domiciled residents on all-source income and nonresidents on Arizona-source income.
The 2025 form carries that acquisition cutoff. Its line-24 calculation does not state a dollar cap; that is a reading of this form, not a guarantee for every filing situation.
Does my state change anything? Static checklist
- Write down your domicile on each sale date; use the crypto taxes by state residency method.
- Identify the layer: Form 140 handles the gain through individual income tax. See crypto taxes by state for how the layers differ.
- Check each lot's long-term status and purchase-date condition.
- Identify your return: Form 140, Form 140PY or Form 140NR.
- Record the crypto-scope question: general asset wording does not expressly name crypto sales.
- For part-year allocation, use the hub's residency method. This page does not supply a 140PY computation.
Rates, thresholds and deductions
Two numbers get mixed up constantly.
The 25% is the share of qualifying net long-term gain you remove from Arizona taxable income (current figure at the Arizona Department of Revenue); the 2.5% is the rate applied to what is left on the 2025 Form 140.
The filing thresholds below are gross-income tests, not exemptions on gain. The instructions apply them when gross income is more than the listed amount, after excluding income Arizona does not tax. Nonresident filing thresholds are adjusted by the Form 140NR income ratio.
Arizona figures for tax year 2025
| Figure or condition | Tax year | Authority document and line | Scope |
|---|---|---|---|
| 25% subtraction of net long-term capital gain | 2025 | Form 140 instructions, lines 20-24; line 24 = 25% of Form 140 line 23 | Qualifying long-term gain; short-term gain excluded |
| Asset acquired after December 31, 2011 | 2025 | Form 140 instructions, worksheet, page 32 | General asset condition; undeterminable date treated as pre-2012 |
| 2.5% (.025) tax on remaining taxable income | 2025 | Form 140 instructions, line 46 | Applied to taxable income on line 45 |
| Gross-income filing thresholds: single $15,750; joint $31,500; head of household $23,625 | 2025 | Form 140 instructions, filing requirements | More-than tests; not gain exemptions |
| Return/payment April 15, 2026; requested six-month filing extension to October 15, 2026 | 2025 | Form 140 instructions, filing and extension | State Form 204 or valid federal extension; payment date unchanged |
How a crypto sale reaches the Arizona return
Full-year residents making this adjustment use Form 140. Its line 12 starts with federal adjusted gross income, so the sale has already been figured federally before Arizona sees it. Lines 21 and 22 draw from federal Schedule D.
Lines 20 through 24 hold the capital-gain block, and line 23 is where the net long-term gain from assets acquired after December 31, 2011 lands after the worksheet adjustments; the subtraction is 25% of that line.
Work the federal side first and get it stable.
Our guide to federal short- and long-term rates covers the holding-period split, and you can estimate the federal tax on a sale with the calculator, which is federal-only and says nothing about Arizona.
Calendar-year 2025 returns and payments are due April 15, 2026. To obtain the six-month filing extension to October 15, request a state extension using Form 204 by April 15 or use a valid federal extension. It does not extend payment time.
See Form 140 instructions, filing dates.
One trap on the subtraction side: the same gain should not be counted twice across Arizona subtractions.
The Form 140 line-24 caution and worksheet exclude gain already subtracted for qualified-small-business investment on line 25 or for a legal-tender exchange under item R.
Gain moved to Form 140-SBI is not also claimed here. None of that determines whether crypto is legal tender; corporate filing is outside this page.
If you cannot show the purchase date
Here is the consequence stated plainly: if the acquisition date cannot be determined, the 2025 Form 140 instructions treat the asset as acquired before January 1, 2012, and the gain falls outside the subtraction.
The date an exchange account opened does not establish when a particular asset was acquired.
Gifts and inherited holdings use the giver's or the decedent's acquisition date. So the record you need is not the date the coins reached you, it is the date the original owner got them.
A later transfer between your own accounts does not establish the original acquisition date. Record reconciliation starts with separating those dates, then connecting the sale back to the original acquisition. A current account total alone does not supply that history.
Our guide to reconstruct the original purchase history covers the rebuilding work, and if the gap shows up on a broker form instead, see how to understand a blank Form 1099-DA box.
Can the acquisition date be established? Decision and preparation card
- Short-term gain → outside the 25% worksheet, whatever the date shows.
- Long-term gain, determinable date after December 31, 2011 → the date condition is met. The other conditions in the instructions still apply.
- Long-term gain, determinable date before January 1, 2012 → outside the date condition.
- Long-term gain, date cannot be determined → treated as acquired before January 1, 2012, and outside the subtraction.
- Gift or inheritance → use the giver's or decedent's acquisition date, not the date you received the asset.
Worth pulling together before you touch the worksheet: dated transaction records from the original acquiring account; the transfer trail linking that account to the one you sold from; and the original owner's history for anything gifted or inherited.
This is a suggested preparation list. The Form 140 worksheet does not declare these records legally sufficient.
If you moved during the year
Part-year residents file Form 140PY.
Nonresidents file Form 140NR, and the 2025 Form 140NR instructions, lines 37-38, allow the 25% subtraction only for qualifying Arizona-source long-term gain.
An Arizona mailing address does not make a gain Arizona-source.
This page does not supply the 140PY subtraction computation. Use the crypto taxes by state residency method, then the 140PY instructions for that return. The 140 and 140NR rules quoted here do not establish a part-year allocation formula.
What Arizona says about crypto by name
The 2025 Form 140 instructions, items S and T, name virtual currency and NFTs under A.R.S. 43-1028. Item S subtracts their value at receipt in an airdrop only to the extent that value is not already excluded from Arizona gross income under the Internal Revenue Code.
The airdrop subtraction does not cover later appreciation. Item T permits the gas-fee subtraction only for fees not already included in virtual-currency or NFT basis; it concerns network fees facilitating a purchase, sale or exchange.
Those provisions sit apart from the 25% long-term subtraction. The instructions do not expressly resolve whether a crypto sale qualifies for it; the acquired-after-2011 condition is written for any asset.
Form 1099-DA and the state
The IRS About Form 1099-DA page lists a January 7, 2026 entry excluding the form from Combined Federal/State Filing for tax year 2025. Publication 1220, revised May 2026, Section 12 Table 1, lists Arizona as code 04. State participation does not make this form eligible for that year.
Neither statement establishes 2026 eligibility, a separate Arizona duty, or whether Arizona receives information through other routes.
Open scope questions
The 25% provision does not expressly address crypto sales. The cited Form 140 instructions also do not give the authorizing statute subsection for that subtraction; no statute number is supplied here.
Whether virtual currency falls inside the legal-tender definition remains a scope question. Form 140 item R defines legal tender by constitutional or congressional authorization, including specie.
The corporate Form 120 source listed below is a reference for that separate definition, not authority granting an individual crypto exemption.
The 140PY subtraction computation is outside the instructions cited here.
The cited Arizona instructions cover 2025. Their acquisition cutoff and reporting references do not establish whether a later-year rule has changed.
Bottom line
A documented purchase date is worth real money in Arizona, because a quarter of a qualifying long-term gain comes out of state taxable income and an undeterminable date sends the asset to the pre-2012 side of the line.
The 2025 instructions write the condition for assets generally. Meeting the date test alone does not settle a reader's crypto eligibility.
Start with each lot's acquisition trail, then compare it line by line with the long-term capital gain worksheet in the 2025 Form 140 instructions.
Residency decisions and personal filing positions are not something this page decides for you.
Questions
Does the 25% subtraction mean my crypto sale is automatically eligible?
No. The subtraction turns on general asset and date conditions; the instructions do not expressly approve crypto sales under it. The crypto-by-name section explains the separate airdrop and gas-fee provisions.
Do long-term gains on a K-1 go into the worksheet?
Yes, qualifying net long-term gains from Forms 165, 120S and 141AZ Schedule K-1 are included under the 2025 Form 140NR worksheet instructions.
The worksheet excludes short-term gains and losses; the nonresident Arizona-source restriction still applies. This is not a partnership-level computation.
Can I use the same gain for this subtraction and another Arizona subtraction?
No, the same gain cannot enter the 25% calculation after being subtracted under the qualified-business or legal-tender provisions specified in the Form 140 line-24 caution.
Gain moved to Form 140-SBI is also excluded from this return's claim. These restrictions do not establish crypto's eligibility for item R.
How can I tell that I have used the right date for inherited or gifted crypto?
Compare the date you used against the giver's or the decedent's original acquisition date, which is the date the instructions point to. If the only date you can document is when the asset reached your wallet or account, you have the receipt or transfer date, not the specified one. The decision card above walks the branches.
Related
Start with the original purchase history: reconstruct the original purchase history, then compare the documented dates with Arizona's worksheet.
Two states use a similar gain-removal mechanism with different scope: Missouri's 100% deduction and the exclusions in South Carolina, North Dakota and Wisconsin.
Sources
- Arizona Department of Revenue, 2025 Form 140 Instructions - filing requirements and dates, lines 12/20-24/46, worksheet, items R/S/T (retrieved September 29, 2026).
- Arizona Department of Revenue, 2025 Form 140NR Instructions - Arizona-source subtraction, lines 37-38, worksheet and K-1s (retrieved September 29, 2026).
- Arizona Department of Revenue, 2025 Form 120 Instructions - corporate legal-tender reference listed in the September 2026 research; individual eligibility remains open. Its exact retrieval date is not recorded.
- IRS, About Form 1099-DA - January 7, 2026 entry, 2025 CF/SF exclusion (retrieved September 30, 2026).
- IRS, Publication 1220, revision May 2026 - Section 12 Table 1, Arizona code 04 (retrieved September 30, 2026).
